Encouraging a teenager to start saving is easier said than done. At this stage in life, they are first discovering their identity and becoming more independent. Unfortunately, that does not always include their finances. Most teens want you to continue supporting them financially, even if they don’t want you meddling in their personal affairs.
As heart-wrenching as it may feel, it’s important to accept your teenager’s desire to spread their wings. In fact, you should celebrate their desire to think independently—it will take them a long way in life.
Instead of fighting the inevitable phase of letting go, you can start educating them about the spending and financial issues that often accompany adulthood. What they don’t know can hurt them as they navigate the real world.
While it is understandable for parents to shield their kids from financial stress, it is not always wise to do so. It’s crucial for them to learn about money management before they start making their own decisions.
You can role model how making financial mistakes is okay as long as you work to rectify them. That is a valuable way to instill the right habits to help them grow their personal wealth.
According to a survey from Greenlight Financial Technology, 93% of teenagers have big life goals and seek the financial literacy required to achieve them. In addition, 54% of them aspire to be entrepreneurs.
Having adequate knowledge can prompt them to start saving more, make fewer unnecessary purchases, and invest in the future. If this is your sentiment, your teenager will likely feel the same way in a few years. Therefore, it’s important to equip them with the financial knowledge needed to avoid making mistakes – like borrowing too much in student loans or falling into credit card debt.
4 ways you can push your teen to save more
Recent data from the U.S. Census Bureau reveals that more young adults who moved home in recent years are ready to move out and live on their own. In 2022, 15.6% of young adults aged 25-34 were living with family—a slight decrease from 17.8% in 2020. Most of these individuals wanted to ensure financial stability before leaving the nest.
While this may indicate a growing trend of close-knit families, it might not always bode well for your own personal financial situation. If you are still paying for your child when they are well into their 20s, future goals like retirement could fall by the wayside.
One of the best ways you can gently guide your teen to become financially independent is by teaching them how to manage their money. One of the first lessons is how to start saving more.
Here are four ways you can help your teenager develop good saving habits early on:
1. Encourage them to set goals
Having a goal is the best motivator to save money, so ask your teenager about their future plans. This could be tricky since some of them are still unsure of what they want—which is okay and completely understandable.
You could start by asking what they hope to accomplish in 5 or 10 years. Encourage them to make their goals more specific and concrete than, for example, “have a good job”. Do they hope to own a home, start a family, or become an entrepreneur? At that age, their opportunities are endless.
2. Make saving more visual
A general practice is to put money in the bank and watch it grow. In a way, this will keep your teenager from spending it irresponsibly. However, it could remove the feeling of accomplishment.
You may have to make saving more visual for your child. A savings jar or a piggy bank could be an effective solution if you have a young teen. Or open a savings account with them and go over the deposits every month. As they see the number go up, they will likely be motivated to spend less and save more.
3. Have them track their spending
As part of their financial lesson, you can have your teenager track their spending through a diary. Try not to cringe as you see their expenses – especially those for video games and unnecessary items. Be gentle in teaching them the value of smart spending. After all, showing them is typically more influential than telling them.
4. Teach them to earn money
Lastly, you should teach your child how to earn their own money. Encourage them to find a part-time job or paid internship during the summer. If you have your own business, you can hire them and assign real responsibilities. This is an ideal way to help them grow through support and positive reinforcement.
You can also teach your child to earn money online. If they are a talented writer, you can help them set up an online freelancing career. Or perhaps you can have a yard sale with them to sell any possessions they no longer use.
This also provides a good example of recycling goods instead of simply throwing them out. While they will have the freedom to do whatever they want with the earnings, gently remind them that the cash would do a world of good in the bank – especially with today’s high savings rates.
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Why parents play an important role in a child’s financial education
A recent survey showed that 63% of teens said they learned most of their financial advice from their parents. No matter how rebellious your child may be, they will likely pick up your financial habits. This could bode well before heading off to college or moving out.
Here are a few reasons parents play a big role in shaping the financial literacy of their children:
Your kids respect and trust you
Let’s start with the respect they have for you as an authority figure-even if they won’t admit it. Teens trust and listen to their parents the most. Use this power to influence them to make good financial decisions.
You are the best person to understand what they need
No one understands a child more than their parents. If you see them wasting money on impulse purchases, ask if they really need the item. If food delivery is a nightly event, explain why grocery shopping is not only cheaper, but it’s also healthier.
You can easily influence and shape the future of your kids
If your own parents failed to teach you about finances, you probably understand the drawbacks. So, share what you learned the hard way and let them enter the real world armed with the financial information they need. Helping them avoid debt before it happens is one of the greatest lessons you can teach to give them a head start in an independent life.
Common questions about personal savings
Why are personal savings so important?
Your savings can be the ticket to your financial wealth and independence. It will also help you cover unexpected expenses and finance any investment that allows you to increase your current net worth.
How can I create a personal savings plan?
Start by setting goals. You can identify the target savings amount and the actions you need to achieve your vision. The details can be placed in your personal savings plan.
How much should I have in personal savings?
This will depend on your lifestyle, income, and financial goals. Some people are happy with a small savings amount because they have amassed assets. Others want to have sufficient cash in the bank. The latter would certainly require you to save more money. It all depends on what you think you will need in the future and your comfort level.
What are personal savings used for?
They can help finance your education, start your own business, or resolve any debt. In the event of an emergency such as a job loss or injury, your savings could help you stay afloat until you land back on your feet.
Should I invest my personal savings?
Yes, but that would depend on your risk tolerance. Make sure you set aside a portion to remain liquid as cash for emergencies. The rest can be invested so that your money earns compound interest and grows.