You teach your child how to walk and ride a bike, but have you taught them about money? More specifically, have you taught them how to save money? Good savings habits and overall financial skills are important for children, but especially teens that have their first summer job. Knowing what to do with their money when they're young can make all the difference once they're adults. Follow these tips for teaching your teen about saving money!
Pay Yourself First
When that paycheck comes, your teen needs to pay themselves first. This means setting aside a certain portion of their earnings into a savings account. One of the easiest ways to do this is to set up an automatic transfer from their checking account to savings. That way, they won't have to think about it, but it will always get done.
If the process is automatic, your teen won't even miss that money. It will feel like they never had it in the first place. Meanwhile, they'll be stockpiling a starter in their savings account.
Help Them Budget
As adults, budgeting might send a shiver down your spine. It's not the most pleasant task, and it sure does take a lot of time and effort. And afterward, you need to stick to that budget. But teaching your teen about saving money and the basics of budgeting is an important tool for their future. They need to know they can't spend more than they bring in, and there's no better way to see that then on paper.
They may not need a full-blown budget since they probably don't have a ton of expenses, but they should know exactly what all those costs are. How much does their cell phone cost? How about car insurance? Gas money? There are plenty of online tools and apps to help your teen get started.
Wants vs Needs
It can be hard not to buy all the "stuff" when that paycheck comes in, but you should talk to your teen about priorities. It's ok if they want to buy makeup or headphones, but did they pay all their bills first? How about themselves?
Make it clear that needs are the most pressing expenses. Give examples such as clothing, food, and house payments. Your teen probably isn't paying for this stuff, but clear examples can help them understand the difference between needs and wants.
Help them realize that they might not be able to afford everything they want, and give a personal example of something you've struggled with. Maybe you wanted a certain car but couldn't afford it, or you bought it anyway and struggled to keep up with the payments. Talking openly with your teen about financial successes and failures gives them real-life examples and can help them understand how important financial responsibility is.
Don't Always Save Them
With teenagers, learning the hard way might be the only way to learn. As a parent, this can be difficult to swallow. If you've had conversations with your teen regarding savings and done all you can to set them up to succeed, it's time to step away and let them fly. You might be surprised to learn they listened and have everything under control.
But you might also find that they've gotten themselves into trouble. Maybe they didn't save enough for their monthly cell phone bill or an unexpected expense that occurred, and they don't have enough to pay for it. Instead of swooping in and saving the day, it might be a good idea to take a step back and let them deal with it. Learning from their mistakes might be the only way for them to realize how important saving money is.