Key Takeaways
- A teen’s income is the best tool for saving money.
- Parent matches and savings challenges can help encourage teens to save.
- Creating a habit of giving money away creates natural savers.
When it comes to raising kids, the teenage years are a parent’s last chance to help get things right before they’re out of the house. Learning how to save money is one of the most important things they will take with them into adulthood.
As a parent, what things should you be doing to help your teenager build good habits of saving and managing money well?
First, let’s talk about when kids should learn to start saving money. Then, keep reading for our top 9 tips to teach your teenager how to start saving money today, so they don’t have to learn that hard lesson later in life.
What Is a Good Age to Start Saving Money?
You can start teaching kids as young as six years old the value of saving money. But once your child is 13, they can open a teen checking account and have a safe place to store their earnings. If you missed the boat to teach your child about saving in their younger years, you can still go far in helping them learn in their teen years.
A great lesson to teach your teenager while they’re still living under your roof is to save up for something big. This teaches them the importance of delayed gratification but also the power of work.
Life requires things that just cost more. Whether it’s a car, a down payment for a house, or a kitchen remodel — things cost a lot of money.
Instead of allowing your kids to fall under the mentality of you can have everything you want right away by taking on debt, instead teach them the power of saving up cash to avoid debt altogether.
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9 Ways to Help Your Teen Start Saving Money
The greatest tool when it comes to saving money is income. Whether it’s an allowance, a job within a family business, or a part-time job after school, creating an income is the first step for teenagers to save money.
Did you know there are companies in Arizona – like Safeway, Chick-fil-A, Starbucks, Baskin Robbins, and AMC Movie Theatres - that will hire teenagers as young as 14 years old?
Arizona law allows teenagers under the age of 16 to work three hours on a school day, for a total of 18 hours per week. When school is not in session, teenagers as young as 14 years old can work up to 40 hours per week.
If your teenager hasn’t already done so, have them open up a teen checking account. Teen checking accounts give teens access to a bank account while giving parents full control over it. This is extremely helpful for your teen to develop financial skills while also building confidence around how to bank.
Whether your teenager has a part-time job or earns an allowance, deposits can be made into the account and your teen can utilize the same online and mobile app tools that you use.
One of the best ways to encourage your teenager to save is to offer a match. Like how employers offer a percentage match into your 401(k), create one for your teenager.
For example, maybe your teenager has a part-time job and brings home $100 every week. Explain to them that for every dollar they save (or don’t spend), you will match half of that amount.
In this situation, if they save $50 of their paycheck each week, then you will match $25. The key here is ensuring your teenager feels the match. In this example, $25 per week can really add up in the eyes of a teenager.
Most teenagers don’t think they need a budget because their expenses are so simple they can just manage it all in their head.
While there may be some truth to that, the best time to help your teenager create a budget is when things are simple. Start by teaching them the zero-based budget.
A zero-based budget is where your monthly income is equal to your monthly expenses.
Income – Expenses = $0
Before the month begins, help your teenager set up a zero-based budget by using an (estimated) income as a starting point. Then, have your teenager decide where that income will be spent before they spend it.
It’s also important to assign some of that income to savings. This way the savings is accounted for before they spend it versus having nothing left over at the end of the month to save. A good rule of thumb is to start saving at least 15%.
Helping your teenager create a zero-based budget allows your teenager to tell their money where to go instead of wondering where it all went at the end of the month.
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In a world where a microwave is no longer fast enough and we have same-day delivery via online shopping, teenagers find it especially hard to delay gratification. They’re learning at an early age to impulse buy because of how fast and convenient it is to make purchases.
Create a 72-hour rule on large purchases. Maybe this means any purchase your teenager makes over $50 requires a 3-day grace period from when they decide to purchase until they make the purchase.
By removing impulse buying, your teenager is less likely to overspend, which leaves more money left over for saving.
In 2007, Carnegie Mellon University published a study showing that “credit cards effectively anesthetize the pain of paying.” In other words, paying with cash hurts more than paying with plastic.
Don’t believe it?
Next time you go to the gas station and fill up your tank, try paying with cash rather than with your credit card and ask yourself if that feels any different.
For most people, handing the clerk a $100 bill feels different than tapping your credit card to the chip reader.
Use this same principle with your teenagers and have them use only cash for an entire month. Even if they intend to purchase something online, have them hand you cash and then you purchase it for them.
Without realizing it, your teenager will be more likely to curb their spending, which in turn leaves more room for saving.
One of the best ways to create great savers is to first create generous givers. By instilling generosity at a younger age, teenagers will release the grip that we all naturally have when it comes to money.
As a parent, you can create a giving rule. Leave it up to your teenager to decide where they want to give.
Teenagers love a challenge. Whether it’s a simple dare to do something, or a TikTok challenge they’re following, it doesn’t take much to get a teen to commit.
One great method is to use a 30-day saving challenge.
Here’s how the 30-day savings challenge works: On day one your teenager saves $1, then $2 day two, $3 day three, and so on. At the end of the 30-day challenge, your teenager will have saved $435!
If your teenager had no problem with the 30-day challenge, then set up the 52-week challenge where they save over each week instead of every day. At the end of 52 weeks, your teenager will have saved $1,378!
One of the best ways to encourage your teenager to save money is to show them what’s behind the curtain with the family finances.
Sure, this may feel awkward because it’s natural for us to keep our money private. However, showing your teenager your bank statements isn’t advertising your private money matters to strangers, but is rather providing a valuable lesson for your teenager when it comes to finances.
Showing them how much Mom and Dad pay to keep a roof over their head, the lights on in the house, fuel for the cars, and food in the fridge may be the catalyst for a future of saving money for your teen.
Seeing the overall household expenses also helps set up the second conversation about where the money will be coming from once Mom and Dad retire.
This is the perfect opportunity to talk about saving for things such as large expenses, emergencies, and retirement.
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As important as it is to teach your teenagers how to save money, it’s even more important to show them how by acting it out yourself.
Let them know when you’re creating your family budget, how much you’re saving for the next big expense and even how much goes into your 401(k) each month.
By taking the time to be intentional with your good financial habits will spill over into your teenager developing those same good financial principles that will last them a lifetime.
By Chris “Peach” Petrie,
Founder of Money Peach
Chris “Peach” Petrie is the founder of Money Peach. Money Peach partnered with OneAZ to provide free financial education to members across the state. To learn more about OneAZ’s partnership with Money Peach, click here.
