According to recent statistics, 73% of American teens said they’d like to know more about personal finances..1 And while many said they get money tips through a variety of sources – parents, school, social media – 75% didn’t feel confident about that knowledge. As a parent, you may feel the same way at times, trying to manage your money during the pandemic, now inflation. But helping your kids become savers is one of the best gifts you can give them. It’s the foundation of building lasting financial well-being.
Here are some ways to help them start and keep saving now.
Open a Checking and Savings Account
Once your teen starts earning their own money, open up a savings account so they can learn to spend and save. If they get a job, open a checking account. If your teen is under 18, you’ll have to co-own the account. This can help you track their spending habits and avoid account overdrafts. You may want to encourage them by matching their savings for a set time period.
Set Them Up for Success
Showing them how to save and spend demystifies money concepts. When they start earning a paycheck, help them set up a budget, put money into savings and set goals. For instance, if they’re inclined to be tech-savvy, they might like to manage a secure budgeting app to track their spending in real time. They can also watch their savings grow and save for specific goals.
Share the 10% Rule
It’s one of the most straightforward rules of thumb around: pay yourself first. If your teen takes 10% of their income and sets up automatic transfers to an account separate from their checking or regular savings, it’s money they won’t miss now, but will reap the benefits later. They can use it for emergencies or saving for bigger goals, like buying a car.
Consider a Starter Credit Card
When your teen turns 18, they may be eligible for a credit card and might want one. Discuss how borrowing and credit scores work before that time comes. If your young adult is not that great with money yet, but still wants a card, consider a “starter” credit card. Your teen deposits an amount such as $500 into a dedicated savings account. This amount establishes their credit limit. Then, they simply borrow from that savings account. Paying bills on time and paying the balance off each month will help them build a credit history.
Discuss Paying for College
If your teen wants to pursue higher education, talk about saving and paying for college early and help them create a plan. On average, college tuition ranges from $10,740 to $38,070 annually.2 Together, discuss how to pay for these expenses. If you have a college savings account, encourage them to contribute. Help reduce overall costs by attending community college, and getting grants and scholarships. Exploring these ideas will help them as they navigate next steps.
Additional Reading:
10 Money Moves to Make in Your 20s
- Source: Greenlight® Financial Technology 2. Experian
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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or GreenPath Financial advisor who can help tailor a solution for you.
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