Feb 04, 2022 / Local Utah
Learning financial concepts can be complicated for young people. Saving money, in particular, can be a difficult lesson to learn when income is low and every possible expense is so exciting. On top of that, financial education is rarely prioritized at the high school level, leaving teens to make savings and spending decisions for themselves through trial and error. But there are a few things you can do to help your teen save money now and build a solid financial foundation to last a lifetime.
No matter how awkward it can be, the time comes in every teen’s life when they have to sit down with their parents to have “the talk.” We’re not talking birds and bees here, we’re talking budgets and balances—important financial concepts that can help your teen avoid serious financial mistakes in the future. Help your teen understand the value of saving money. Review future savings goals, both immediate (saving for a car, a video game, a musical instrument), and some down the road (saving for a home and retirement). Help them to understand how their savings can grow and compound over time, and just how long it will take to save up for those big future expenses. When your kids understand the practical repercussions of saving and spending, the decision to save becomes much easier in real life.
It’s always a good idea to separate savings from spending money. Even if your kids already have a checking account with a debit card, a separate account can help them avoid the temptation to dip into their savings. The Utah First Savings for Success account is a great place to start. If your teens don’t already have an account, Utah First will give them $100 as a head start on their savings goals. If your teens already have a savings account with Utah First, they can refer two friends and get a free $100 deposited directly into their account. Having some savings seed money is a surprisingly effective financial motivator for teens to keep adding to their existing funds. And because it’s in a separate account, they can know exactly where their savings stands at all times without wondering whether they should spend it.
If your teens are already employed, encourage them to deposit a set amount (many online financial resources recommend 20%) into their savings account every paycheck. To make savings easier, your teens can request direct deposits of a specified portion of their paycheck into their savings account. That way, the savings decision is already made before the money hits their account. If your teens earn allowance by doing chores around the house, consider doing the same thing. Put a percentage of their income into savings using digital banking. This habit can lay the financial framework for other types of automatic investments and savings opportunities in the future. It helps your teens understand that every penny earned isn’t subject to spending. And it’s a great way for your teens to watch their savings grow on a consistent, compounding basis.
One of the benefits of separating spending and savings is that it forces your teens to pay attention to their incoming and outgoing funds. Without relying on the safety net of their savings in the same account, your teens have to manage their money more closely and check their balances before every spending decision. If your teens happen to have extra money at the end of the month, even if they don’t live by a budget, encourage them to put some or all of the money into their savings account and start fresh. Doing so will promote savings, force them to keep tabs on their spending money, and be more frugal.
As your teens are busy learning the basics of life—reading, writing, arithmetic, and other practical life lessons—help them learn to save, invest, and manage their money. Doing so can give them a head start on savings goals, help them achieve financial independence, and stay ahead of the savings curve in a competitive financial world. To learn more savings tips, including more information about the Savings for Success account, stop by a branch, browse our website, or call one of our helpful savings experts.