How Teenagers Can Save Money Fast
Thursday, Jul 14 2022
Teen years are often the first time young people earn their own money. A small percentage of teenagers know how to save money fast, but most don’t. Making good saving decisions will lead your child to financial success. But how can your teenager save money fast? It starts with their buy-in and your help.
Why Early Saving is Critical
Research suggests parents are reluctant to talk about money with their children. A survey found that 41% of parents avoid financial conversations with their children. But, saving money is a crucial life skill. And establishing healthy financial habits makes teens more likely to grow into adults who experience less financial stress.
Reasons to start saving early include:
- Teaches Value. When someone else pays to keep a roof over your head and provides everything you ask for, it’s easy for teens to take the value of money for granted. Teaching your children how much things cost will help them understand the value of a dollar. Break down your expenses, including mortgage, groceries, insurance, and everything else needed to keep your household running, and share the information with your children.
- Develops Positive Spending Habits. Learning to save is a fundamental financial skill. Like other habits, it requires a proactive approach and practice. Teens who learn early and on a smaller scale can hone their saving skills before making major financial decisions.
- Builds Self-Reliance and Independence. It’s tempting to step in and overrule your teen’s money decisions. But, learning financial independence may involve making mistakes, which sets your child up for self-reliance and confidence in their adult years.
- Encourages Sensible Spending. Saving and learning to budget help a teen understand the value of money and work. Learning to save encourages teens to think about trade-offs, which could lead to smarter spending choices.
How Teenagers Can Save Money Fast
The majority of Gen Z, born mid-1990s to early 2000s, say they’re unclear about how much to save versus spend. It’s essential to understanding how to earn money and set budgets, especially moving into adulthood.
Steps to improve how teenagers can save money fast are:
Step 1: Opening a Savings or Checking Account
Your teen will need a place to stash their cash. The porcelain piggy bank may have worked when they were younger, but now is an excellent time to consider a savings or checking account. Opening a checking or savings account can help establish a relationship with a local bank or credit union while familiarizing your teen with these fundamental financial tools.
Your teen can open a savings account jointly with a parent or guardian. Both names will remain on the account as long as it’s open. There’s an option to remove the parent or guardian from the account once the teen turns 18.
You’ll need a driver’s license, passport, or other government-issued photo ID to open an account. You’ll also need to provide a Social Security card, and some banks may require additional documentation. Pay attention to the interest rate, fees, and minimum balance requirements for committing to the financial institution.
Step 2: Find a Job or Side Gig
One of the most valuable ways your child can learn about saving is by earning money. U.S. Department of Labor research found that every year a person works in their teens, their income rises 14% to 16% in their 20s. In addition to earning money, employment teaches responsibility, instills positive work habits, and improves time management and organizational skills.
Keep in mind that the minimum age for employment is 14 years old, and the hours a teen 16 or under can work are capped. If your teen is too young for a traditional job, mowing the neighbor’s lawn, babysitting, or tutoring can keep income flowing.
Step 3: Create a Budget
Budgeting as a teen is not much different from budgeting at any other point in life. Budgets help prioritize spending and create awareness of the money coming in and going out. And because teens have fewer expenses, the process is more straightforward.
Budgeting begins with knowing how much your teen earns. Whether it’s income from a part-time job or side hustle, total the monthly earnings. If the amount varies from month to month, be conservative with estimates.
Build a list of wants, needs, and wishes with your teen. Needs are basic living expenses or required expenses. For your teen, it may include gas money, phone bill, or car insurance. Wants are items they can live without, such as eating out, new clothes, or their gym membership.
Step 4: Set Short and Long-Term Goals
Set SMART (specific, measurable, achievable, realistic, timely) financial goals with your teen. Goals will help motivate teens to challenge themselves. They help your child think about the big picture and focus on the future instead of immediate satisfaction.
Short-term goals could include buying a new video game, trendy pair of sneakers, or concert tickets. While long-term goals may include saving for college or their first car.
Have your teen put their goals in writing to make them more concrete. Every time they receive a paycheck or allowance, they should designate a portion toward their goals. Consider motivating your child by offering to match, dollar for dollar, to what they save toward their long-term goal.
Step 5: Track Spending
Knowledge is power. Part of knowing how to save money fast as a teenager is knowing how to be a savvy spender and tracking where your money goes. A good old pencil and paper will work, but your teen may find it easier to track their spending and savings using an app. Certain banks and credit unions offer apps tied to savings or checking accounts.
Opening Student Checking and Savings Accounts with Focus
Prioritizing saving is a valuable life lesson and one that takes time to learn. Opening a savings or checking account for your teen is vital to introducing financial literacy at an early age. The earlier you begin talking to your teen about money and financial responsibilities, the better equipped they’ll be to make sound financial decisions as an adult.
Contact a Focus Federal Credit Union advisor or visit the website for options to help your teen start saving today.