The average teenager is more interested in spending money than saving it. Unfortunately, this is the norm, and many teenagers, including those who may have a summer job, spend all their money without any thoughts for the future.
However, there is no such thing as the right time to start saving. Hence, if you are a teenager, you can take charge of your life and decide to start saving any cash you get. You need to start with your own money. But the goal is not to stop there. At some point, you will need to invest and have your money birth returns.
As parents of teenagers, it is also important to teach them about savings very early. Instead of leaving them to learn from friends, you can take it upon yourself to guide them on how to save money as a teen.
It’s okay if you don’t know where to start. That’s what we’re here to help with! If you’re looking to learn how to save money as a teen, this guide is for you. Ready? Let’s dive in!
Why You Should Save and Invest as a Teenager
There are several unparalleled reasons why teenagers should learn how to save money as soon as possible. Below are a few of them.
To Meet Savings Goal
It is never too early to have savings goals. This means that it is equally never too early to start saving. Thus, as soon as teenagers start making some money, including gifts and handouts from family and friends, they should have a goal and start working towards it.
This is important for several reasons. First, it helps teenagers develop a good sense of self and how to be financially independent. Second, many parents struggle to inculcate good spending habits and money management skills in their wards. Setting an example through making it easy and mandatory for the teenager to save money is one way to achieve this.
More so, it makes sure the teenager has some money saved up. Ostensibly, the teenager would eventually proceed to college. That is an expensive endeavor. Regardless of how much money teenagers save, it would undoubtedly go a long way in settling whatever debt they incur.
Beyond that, the money could be used to make a down payment for a house for said teenager, buy their first car, or even go into a retirement fund. In summary, there are so many ways money gotten from a teenager’s savings can be invested.
Money Management is a Fundamental Life Skill
Financial management is an indispensable life skill everyone needs. At some point, the teenager will become an adult. They will then have to deal with monthly expenses and pay for various life necessities straight from their income. A teenager who does not learn how to save will be headed for ruin. They are the kind that will join friends to splurge on new clothes or a video game instead of working towards their savings goal. On the other hand, when a teenager starts saving on time, they can imbibe a culture that will be useful later in life.
More Teenagers are Working
No more than ever, teenagers are breaking free from the grip of their parents. Of course, in the past, the average teenager could get a part-time job washing cars or mowing lawns and receive compensation at the end of their work. However, the rate at which teenagers work these days is alarming. This is perhaps because of the explosion of the internet. Hence, the definition of summer jobs has expanded, meaning that a lot more teenagers are making so much money, even sometimes above what their parents earn. Thus, teenagers need to start learning how to save and invest their income on time.
To Prepare for other Financial Products
When a teenager clocks 18, they have access to different financial products. These include credit cards, payday loans, and so on. A teenager needs to master how to save money before this time. Saving money introduces the teenager to financial prudence and accountability. When the teenager reaches eighteen, the “training wheels will go off”. Thus, they could take advantage of the various financial products they have to make terrible decisions. Saving and learning to invest stops impulse buying, teaches the teenager the benefit of delayed gratification and the beauty of money saved over a long period.
In the meantime, before they become eligible for financial products, they could access several financial benefits using their status as minors. For instance, a teenager can use their student ID to get student discounts, tax exemptions, and better bonuses on their savings. However, the teenager needs first to start saving for this to be possible.
Taking Advantage of Compound Interest
Starting to save and invest from a teen age is a perfect example of a long-term investment strategy. This is profitable for many reasons, among which is that the saver takes advantage of compound interests. Compound interest makes sure that regardless of how much money the teenager saves, there will be some reasonable accrual over time.
As a parent, the best legacy you can give your child is the room to start saving as early as possible. Then, instead of spending their money on frivolities, they could be actively working towards their future.
How To Save Money as a Teen
Below are some top tested and trusted ways a teenager can begin their savings journey.
Have a Savings Goal
The first step in saving money as a teenager is crafting a savings goal. In fact, this is the primary rule for saving, whether as a teenager or not. A savings goal creates a path for you. It gives you something to work towards both in the present and the future. Instead of just saving money randomly, you can also keep an account of how much you have saved and what remains. That way, you can either pat yourself on the back or commit to working harder.
Unfortunately, most people (including teenagers) default in this area and hence end failing from the start. Others may stick to a plan for a few days and then scrap their commitment the first chance they get to spend more money.
How do you decide on your savings goals? First, write down any need you have. If there is something specific you need money for, you will also have to include it and the certain amount you are looking to save. Then set out the period you intend to realize your goal. You can decide to break down your goal into weeks or months, depending on your income or how long you want to save for. For instance, if you have a summer job, then ideally, you should be able to save quickly.
Open a Savings Account
After creating a savings plan, the next step will be to open a savings account. Understand that you will need to open a bank account to save money as a teenager. The piggy bank you used as a kid will not suffice here.
When it comes to bank accounts, several options are available. You could use a checking account or a savings account. Ideally, checking accounts should be for your day-to-day spending and not for savings. Hence, it could get connected to your debit card. You can readily withdraw cash from there to settle immediate needs.
However, if you are serious about saving your money, then you should consider using savings accounts. Unlike checking accounts, you earn interest with savings accounts, especially a high-yield savings account. This translates to more money for you.
As a teenager, your parents may have to step in for you to open a valid savings account. This is especially if you have not clocked eighteen. However, you ought to open a savings account if you are serious about saving your funds.
Use Savings Apps
We are currently in the internet age. Hence, it is almost impossible to find a young person who does not own one or more mobile devices. However, and unfortunately, many teenagers end up downloading and using apps that serve little or no purpose.
If you are planning to start saving money as a teenager, this means that you are, on the most part, a responsible person. To aid you in this quest, you may want to use savings apps. Savings apps, as you can guess, are apps that help you fulfill your savings obligations. There are many of them with different capabilities. For example, some allow a direct deposit, while others have features such as a savings calculator that calculates how much your monthly savings should be. In addition, you can link most to your bank account, automating the savings process.
One of the best out there is Acorns. It is a relatively easy app to use to save money for a fantastic future for yourself. Others include You Need a Budget (YNAB), Mint, PocketGuard, etc. Bear in mind that you may have to pay some subscription fees. It may not make sense to spend dollars to save. However, everyone who has gone through the school of finance knows that you need to spend to save.
Improve Your Spending Habits
You cannot save money as a teenager if you do not get some grip on your personal finance. Ordinarily, saving money means deciding on the important expenses and the ones that are not. Thus, you will have to create a priority ranking.
You will address needs at the top first and then gradually descend to the bottom. There is no specific rule regarding the needs that should rank high on your list. However, using common sense, you should know that a need such as student loans will be more important than going on a summer vacation.
Of course, you may not get to take care of every need on your list, except you get some extra cash. But, even in that case, you may even have to plow back the extra money into your savings.
Unfortunately, not everyone is excellent at setting spending boundaries and sticking to them. Some folks whip out their debit cards at the sign of advertising messages and fail to realize when they are spending huge sums of money. However, without creating a spending budget and sticking to it, you will find it almost impossible to save money as a teenager.
Make Some Money
It is easy to save money if you are making some already. However, saving your school allowance is not the same thing as saving money that you make yourself. Hence, you could begin by negotiating deals with your parents. For example, you could do home chores and get paid. The more chores you do, the better deals you get and the more money you can put away for your future. Asides from that, you can run errands, mow lawns, wash cars, deliver mails, etc. Just find something to do and make sure you get paid to do it.
Conclusion: Saving Money as a Teen
Can you save money as a teenager? Absolutely! This guide gave you a complete overview of all you need to get started. Now, all that’s left is to get saving!