How to save money as a teenager
How to teach your teenager to save money
Saving early in life is important.
What a teen learns today will help him become a financially ready adult in the future. Therefore, it is essential for parents to promote savings and pass on money lessons to their teens.
These are some of the things you can do to help your teens save money.
Teach your teen about the importance of saving money, even if he only has a few dollars to deposit each month.
Encourage them to find paid work that they enjoy after school, on weekends or during summer vacation.
Show your teen how to set short-term and long-term money goals and explain how they can work towards them.
Start a savings account with your teenager
It is not feasible for your teenager to save every penny they earn, so encourage them to start small. Even if they save only $ 20 a month, they can make a positive difference in their financial situation. Since most banks and credit unions require minors to open a savings account with a parent or guardian, you will likely need to set up a joint account on your behalf.
How much should a boy save?
How much a teenager needs to save can vary and often depends on his financial situation. Some factors to consider include how much income they will earn and why the money is intended to be used, such as purchase, college savings or long-term savings.
Because teens typically work part-time, their income can fluctuate, and saving a fixed dollar payment period may be unrealistic.
For example, if the goal is to save $ 50 throughout the pay period and youth work hours vary due to schooling, sports, and other activities, they will not be able to reach their savings goal and may despair of lack of progress.
As a result, one of the most beneficial methods for saving as a teenager is to allocate a percentage of the income to a savings account. By saving a percentage of their income, they will save more money when they work more hours and save less money in weeks with fewer work hours. Regardless of their income, the same percentage contributes to savings.
Using percentages can also help teens budget their income by allocating percentages for savings but also percentages for certain expenses or financial destinations, such as travel or buying a phone.
Automate a teen's savings
Once teens have the percentage or portion of their profits they want to save, they may want to automate their savings. A good start to an automated savings plan is that the adolescent will save 10% of each paycheck.
For example, if they earn $ 100 a week, they will deposit directly into the savings account - $ 10. This “out-of-sight, out-of-mind” strategy can make it easier for teens to save, especially if they tend to spend too much.
It is important: If you open a custody account for your teens to apply for retirement savings later, encourage them to put their own money in it as well, so that he can play an active role in their early retirement while watching the money grow over time.
Encourage teens to work
Working as a teenager can help teens develop self-development, such as better time management skills by balancing work and school life. It has also been shown that healthy patterns of high school work and study continue later in college and beyond.
By encouraging teens to work, you can teach them the value of money. They will be much less likely to spend $ 5 on a Starbucks drink if they know the money is coming out of their paycheck.
"Earning a salary, in any way, at a young age gives teenagers self-esteem and is a catalyst for the 'drive' they will need to be successful later in life," said Jennifer Vertanov, CFO and credit card founder.
“Also, when teens have a job, they establish a sense of independence that will facilitate the transition to college or adulthood. Teens can work as babysitters, waiters or in restaurants, lifeguards during the summer, or teachers for younger children. The possibilities are almost endless. ”
Teach teens how to set money goals
You can help teens set money goals in a variety of ways.
"I always encourage parents to look for moments that can be taught in the real world, like helping their child set a budget to save for something they really want, like an iPad," Joanna said. "The best way to do that is to sit down with them, figure out how much they are earning on average per month, how much the item they want costs, and work your way forward from there."
According to Vertanov, "you can also encourage them to split different gifts or profits with the help of 'buckets'." One is the "savings" bucket, and the other is the "spending" bucket. The savings bucket is for important financial purposes, while the spending bucket helps teens understand that they can spend certain things that make them happy, as long as they do it responsibly.
Help teens learn where their money is going
“You can help teens keep track of expenses by showing them how much they take home [from work] after taxes and what their monthly expenses are,” Joanna said. "From there you can work together to set a suitable budget."
Another option is to write things down, including financial goals. There are also a variety of budget-friendly teen apps that your child might find useful. Some examples of these applications are Mint and Saving Spree.
The bottom line
Just like anything else, money habits are formed early, and the sooner you start advising teens on how to save money, the better. Remember, there is no right or wrong way for them to save. It all depends on their personality, preferences and financial situation. As long as you educate your teens about the importance of saving money and give them options on how to do it, you will help set them up for a financially secure future.
How can teens start saving for retirement?
A custody account (like UTMA) is a great way for you to help your teens start investing and save for retirement. You can donate to him every month so that the money grows over time.
How much should a teenager save each month?
Each boy has a unique financial situation.
However, as a rule, teens can strive to save 20% of their earnings per month, and they should not spend more than 50% on discretionary expenses.
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