Teens and money seem to be mutually exclusive—if our kids don’t learn the right lessons early, they’re likely to make big financial mistakes. It doesn’t help that they’ve got to learn most of these important lessons before they enter college.
But, as parents, we often don’t give our teens enough credit. They are quick learners, great adapters to change, and can even teach us a thing or two about self-discipline. Because teens are still in their green years, they are much easier to mold into strong money stewards as compared to adults who have to break bad habits.
There’s no doubt that if my 17-year-old daughter had been on her own with money, she’d probably make the same mistakes I did growing up: spending before saving, making impulse purchases, and not really thinking about the future.
I was determined to help my teenager side-step the pitfalls I experienced. So as soon as she got her first job, I started talking to her about money, specifically how to take care of it so it never runs out.
1. How to read a paycheck
First, I taught her the basics of reading a paycheck. I showed her where to see her hourly rate, what FICA and OASDI (two payroll taxes) mean and why they took some of her money, and what taxes she was now required to pay.
Since her first job was with our local Parks & Rec department, she was a city employee, which meant she also paid a small union fee.
2. How much to save, spend and donate
Since my teen doesn’t currently have any bills or payments, it’s a perfect time to optimize savings. We started with a 10/30/70 split — 10% tithing, 30% spending, and 70% savings.
As she received her paychecks, however, we realized she could probably save even more money. Since she doesn’t have bills and was practicing frugality, she was able to get by with just 10% for spending money.
So, her split turned out to be 10% tithing, 10% spending, and 80% savings.
I know this split won’t be doable in the long run, but having a more aggressive saving strategy at a time when she’s not responsible for any bills will serve her well in the future.
She’s saved quite a nest egg, too, with close to $10,000 in her savings in just two summers. It’s exciting to see your money grow so fast, and I think it keeps her motivated to save more.
3. How to be frugal and still enjoy life
Teaching frugality to a teen is not an easy feat.
The main thing I focused on was teaching her that frugality does not mean deprivation. It simply means that you focus on what really matters and save money by not spending on the things that don’t.
For example, she enjoys going out with friends, so we set a budget so that she can go out once or twice a week. But we also went over what she needs to save money on, things like the daily Starbucks run or takeout for work lunches.
Ultimately, she decided on her own that she wanted to bring her lunch and coffee to work each day in order to save money for the things that matter most to her.
4. Delayed gratification
Delayed gratification is a hard thing to grasp, even for adults. But with teens, it can be easier if you start conditioning their mindset early on.
Using different wording can create a simple mindset shift: Instead of thinking that she has to wait three months to buy something, I’ve taught her to think about looking forward to making a particular purchase in three months. This frames the purchase as a future plan rather than a “not right now” mentality.
She now plans ahead for items she has on her wish list and knows that eventually she’ll be able to get what she wants if she sticks to her spending limits.
5. Have a “why” to help keep yourself on track
Having a “why” is important for anyone who is trying to save, and even more so for a teenager. Setting up a goal — her current goal is to buy a car and cover her insurance — has helped her stay focused on saving. She’s done research to see how much money she’ll need, and this affects how she deals with her spending.
Having a goal makes all the difference in your weakest moments when you just want to splurge on an impulse buy. Being able to remind her of her car goals has helped her stay determined and on course.
Teens sometimes get a bad rap for handling money. But when you teach your teen the proper strategies and techniques for how to save and spend, you ultimately set them up for success. That kind of success will last a lifetime.