10 March 2015
Teach Your Teen To Save

At some time, most of us had to learn to balance a checkbook, apply for a loan, pay bills – even how to write a check. It’s practical money management advice you can pass on to your teens before you send them out into the world.

Start teaching money management as soon as your child understands money. Don’t simply give your child money. It loses value when it comes easily. Instead, create a list of chores and pay them for the work they do. Your soon-to-be teen will quickly learn the relationship between earnings and work.

Have the “money talk” before your teen lands a part-time job. Kids tend to live in the moment, so a paycheck often gets frittered away on “wants”, not needs. Before your child starts earning money from a job, discuss money management basics so your child is prepared when that first paycheck is received.

Teach your teen the basics of handling bank accounts. Someone taught you. Tracking cash is one of the most important lessons you can teach your teen. Pass on the basics to help your teen avoid overdraft charges and other consequences of bad money management. Teens are likely to use debit cards for day-to-day expenses, and it’s easy to overdraw an account if you don’t keep a record of your spending. Help your child set up a simple system of recordkeeping. Then track spending and saving to see where the money goes.

Teach your child about credit cards. It’s easy for teens to get in over their heads using credit cards to make routine purchases. A good rule of thumb? If the item you charge to your card will be gone before the next statement arrives, don’t charge it. Charge cards are a temptation for adults. Imagine how a teen feels using the power of plastic for the first time.

Teach your teen about long-term savings. Discuss savings accounts, money market accounts, and other savings options. Teens can even open Roth IRAs and contribute 100% of their earned income. However, the contribution must come from working a job. Birthday gifts or allowance money can’t be used to fund a long-term savings contribution. The earnings must come from the teen’s work. Your bank representative will be able to provide all the advice your teen needs to start planning for a better tomorrow.

Provide your teen with a savings goal. Saving FOR something is strong motivation to save more. Give your teen a reason to save as motivation to tuck aside a little each payday. They can save for a car or other large expense. Your teen can even contribute to a section 529 account – a tax-sheltered savings account to help pay for college expenses.

Help your teen automate savings. Talk to your banker about automating your teen’s savings with automatic transfers to a savings or money market account. Make it simple and painless to save, and your teen may save more.

Set a good example. Finally, kids learn from their parents, so if your household finances are a source of stress, your kids will learn bad habits just as quickly as good money management practices.

If you respect the hard work it takes to save for the future, your child will learn those values from you. Conversely, if you waste money and constantly dodge collection agencies, your child will come to believe that’s normal. Bad money management habits can start early, so set a good example for the kids.

You can’t expect your teen to manage job earnings, an allowance and other income without some basic training. Teach your teens the value of a dollar. It’s a lesson they’ll thank you for many times in the years ahead.


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice.


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