The teen brain can be a mysterious thing to adults. Luckily, we have scientific research that can help explain why teens do things that may seem illogical, irrational or inconsistent to us.
Here’s an example: Brain research shows that teen brains are wired for instant gratification. So it’s not just social media, the internet and Amazon that have created a “right here, right now” mentality for teens. Their brains are just wired that way, and such outside influences seem to just reinforce an existing mindset.
The good news is that there are ways to help teens resist their impulses, at least when it comes to saving money. Over the years, we’ve taught these tips to thousands of teens, and we’ve seen how a little guidance can work wonders in building good money habits.
The Four Basics of Saving
These four tips to help teens save money are effective for just about anyone, including adults and even middle-school and elementary-school kids.
- Set up a savings goal and figure out how to achieve it. For teens and the rest of us, it can be difficult to save for something that seems far away (retirement) or is poorly defined (a dream vacation). However, a 14-year-old who wants to buy his or her own car in two years has a clear-cut goal and a self-imposed deadline. The next step is to talk to your teen about how to reach that goal – through a part-time job, saving up birthday money, or selling old sports equipment, for example.
- Spend toward your savings goal before spending on other things. This is something adults struggle with too. It’s hard to avoid the temptation to treat yourself or spend on a splurge item when you tell yourself, “I’ve earned it.” Try instead to think about it this way: If you save before you spend, you’re rewarding your future self by attaining a goal that’s more important. Teens, like the rest of us, are more successful if they, “pay themselves first,” by spending toward their savings goal before doing anything else with their money.
- Check in regularly. Online banking makes it easy to check balances for that sense of immediate gratification that teens need. With online and direct deposits, they can stash their money away quickly, then check their account balance to watch it grow.
- Consider how many hours you’ll need to work to purchase the item. This is especially true for teens who have jobs. Whether they work as pet sitters, lifeguards or behind a restaurant counter, their hard-earned money represents hours of their young lives. Teach them to consider anything they want to buy in terms of the hours they’ll need to work to pay for it and remind them to use their NET INCOME. Is that video game console worth 30 hours of their hard work? And if they buy it, how many hours of work will it take to stay on track to reach all of their goals?
How Involved Should Parents Be in Helping Their Teens Save?
Many parents struggle with the balance of teaching or helping but not micromanaging their teens. Here are some ways that parents can help their teens develop a saving habit without taking over.
- Share instead of lecturing. Parents often don’t want to admit their own mistakes, including their financial ones. Honestly, that’s one of the biggest missteps parents make when trying to help their kids with money management. Instead, be honest and open with your teen. If your own financial knowledge is lacking, sign up for a financial literacy class you can take together. Or if you’re not comfortable with investing, try an investing simulation (Investopedia has a free platform) and make it a friendly competition to see who can do the best with their investments. You’ll learn a lot along the way.
- Encourage them to use an app. Most bank apps these days do a good job of showing users where they have spent their money. Using an app for saving, investing or both can encourage teens to follow the “save first and spend what’s left,” advice above. Teens can open investment accounts with their parents as a custodian of the account.
- Talk about their job options. For preteens, volunteering is a great way to learn job skills such as punctuality, task completion and working with teams. Volunteering is also a way for kids to gain experiences that could lead to a future job or round out a college application. Of course, volunteering doesn’t come with a paycheck, so some teens will want to find a paying job. Summertime can be a great time to put volunteer skills to work to score a paying job.
What do each of these three suggests have in common? Communication, or more specifically talking to your teen honestly and openly about what can be a difficult topic. If that sounds scary, we can help. Wealthy Habits has some great resources on our site. We also offer summer camps to help tomorrow’s adults lay the groundwork for healthy financial futures.