It is remarkable how many young adults enter the work force or arrive at university without knowing the first thing about how to manage their finances. The result is that many struggle to control their spending and can run at high debts that may take years to pay off. This represents a major failing in our education systems, with schools rarely devoting any time to teaching financial prudence. Responsibility for instilling financial sense therefore tends to fall squarely on the shoulders of parents and this includes teaching teens the importance of saving money.
The likelihood, however, is that your teen son or daughter will initially be more interested in how they can spend their weekly allowance or part-time job earnings rather than in the prospect of lodging their money into a savings account. Your first task, therefore, will normally be to outline the considerable advantages that accrue once one gets into the regular habit of putting some money aside each month.
Probably the most effective way to emphasise the value of saving is to illustrate how it can be used to enable a larger purchase than would normally be feasible. Maybe your teen is a keen sports fan and you can show them how by holding back $20 per week they can quickly afford that fancy graphite tennis racquet that they’ve had their eye on but previously haven’t been able to afford.
Of course, it’s also useful to point out how putting money into a savings account results in the bank paying you additional money. Make sure that you have arranged for them to have a high interest savings account and hopefully they will be impressed by the fact that they can earn extra money by doing nothing other than leaving their money in the account!
Another effective approach is to focus on longer term dreams and desires. Maybe your daughter has always dreamed of one day taking a trip to explore Europe. Rather than looking at that savings account as just a savings account, it can become that “dream holiday account”. Every time your daughter places more money into the account her savings habit will be reinforced by the goal that she’s working towards.
How easy it is to teach your teen the importance of saving will typically vary depending on their personality. There are some who are natural savers and such kids typically religiously feed their loose coins into piggy banks, from a young age, and then like to regularly count their hoardings! In contrast, there are others who are natural spenders and who find it very difficult to see the value in thinking for the future when the money could be used to satisfy an immediate craving. However, even natural spenders attitudes can be tempered by sound and patient guidance. It may be a case of simply convincing them that they should hold back a small percentage of their money initially and pointing out that this can act as an emergency fund if they suddenly find that there’s something that they absolutely must have but wouldn’t otherwise have the money for.
Opening a bank savings account for a teen can also help them to feel grown up and they are much more likely to get the savings bug if their money is going into an account that is in their name rather than an account that you are holding on their behalf. As parents, one of the most difficult tasks that we face is having the confidence to release some of our control instincts and to allow our children to start to take some life decisions for themselves. This may even include enabling them to have an account that provides access to a cash card and then trusting them to act responsibly in the management of their savings. This may seem scary but it’s often kids who have been totally cosseted from financial management who get into the most difficulties when they finally go off to college or leave home.