Saving money, creating goals and managing budgets to build strong financial habits with your teen just got a little easier. Many have learned, through trial and error, the importance of having a savings account balance in times of need. Let’s go through how we can help guide our teens to make wise, goal-oriented decisions with their money and the benefits of doing so.
The best way to create good savings habits is to begin by opening a savings account. It is important to keep savings and spending funds separate. Your credit union offers many different types of savings accounts to its members. You will find basic savings created for specific needs, but you will also discover personalized savings accounts designed for special life events or holiday spending. For more long-term savings, there are higher interest-bearing options such as individual retirement accounts (IRAs), and certificates of deposit (CDs). Whichever option you choose, savings accounts will create a secure and safe place for your money to reside and build until you are ready to use it.
When saving money, it is important to have a goal to help your teen see the long-term rewards. This is very important for those just starting to earn money and pay their own expenses like: clothes, games, electronics, food, etc. Having a clear objective will help our teens to save, reach their goal, and be a great example to their peers. A practical way to plan is to budget. Budgeting can look different for everyone, as there are planners, apps, websites, and many more ways to organize your income and expenses. Choosing what they are most comfortable with is more likely to create a regular habit of budgeting.
Considering their income and expenses is a great way to show them if their money is going towards needs or wants. Teaching them the differences between wants and needs will have long lasting effects into adulthood and benefit their financial skills for long term needs. Expenses such as gas, cellphones, car insurance, or memberships will start to take priority over fast food, snacks, clothing, video games, or other common expenses that could be lessened. Another good way to show a teen how to save is to encourage them to put away the unexpected and extra income. Money such as, birthday or holiday cash, bonuses at work, tax refunds, etc. are funds they receive which isn’t usually in their planned income. Those rewards, as tempting as they could be to spend right away, can be combined to accomplish an even greater goal and receive a greater reward.
Teaching your teen to save for their future benefit will give them a sense of independence and responsibility. Ultimately, it gives them ownership versus being told what to do. As a young adult, it is important to them to experience these accomplishments and learn how to manage their own money. This will help support them in developing decision making skills and foster their long-term financial success.
