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Teaching Your Teen to Save

Your teenager has just come home and triumphantly announced that her class is planning a year-end trip to Washington, D.C. Here's the great news: it's only going to cost $800! Your first reaction is:

• Faint
• Laugh
• Hand over the money

For most parents, such a sum needed all at once is a substantial hit to the wallet. However, the chance to see our nation's capital is an incredible learning opportunity for anyone, most importantly teens. How do you balance your family's budget with your individual children's needs? The easiest and most beneficial solution: teach them to save.

There are very few teens without some source of income, whether from allowance, a part-time job, or their own business (yes, teens with their own businesses! Read on...) Your teen should be dividing this income into resources for spending and saving. If you haven't already, you need to show them how - or maybe you need to learn for yourself at the same time!

Step One

Give them a reason to save money. In this case, it's given for you: your teen wants to go on the year-end trip. Other possibilities include new stereo systems, cars, new wardrobes, and, of course, college.

Step Two

Reward their hard work. Teens are notorious for short attention spans, so you need to keep them attracted to the idea. If they don't have substantial amounts of time to save for the trip, volunteer to give them a dollar for every ten dollars they save. Praise them whenever they resist the temptation of things like new CDs or an expensive dinner with friends. Also, offer them alternatives to these temptations. Can their best friend burn them the CD on their new computer? Why don't she and her friends have a cooking party - you'll supply the ingredients for their "gourmet" dinner if they can make it (and clean up) on their own. How about make-your-own pizzas?

Step Three

Make it easy for them, at least at first. Spending money is like any habit; you can turn it around by replacing it with a good habit, but it takes work. Match all or part of your teen's savings, and explain to them the idea behind this. Use some of YoungBiz's investing articles and teach them about 401K plans. Help them raise part of the money by paying them for extra chores. Once they see the benefits of saving, they'll begin to realize how much a simple habit change can affect their life.

Save for America's Website