5 Tips for Teaching Teenagers about Savings and Debt

Posted on Thursday, September 10th, 2009 at 5:12 pm in Financial Planning

If you have a teenage child, you should encourage him to learn about saving money and distinguishing between good debt and bad debt. In doing this, you’ll teach him about financial responsibility and help him prepare for a lifetime of sensible money habits. If you let your teenager open a savings account, he’ll enjoy watching the balance increase every time he makes a deposit.

Once they reach their teens, kids should learn about the difference between buying expensive clothes, shoes and games and their more economical equivalents. This will help them understand that they shouldn’t waste their money on high-priced items they can’t really afford.
Here are five tips for teaching teens about managing their money:

1. Open a savings account for your teenager at a local bank or credit union. Financial institutions usually offer free accounts for minors, so he will get the full benefit of the interest he earns. He can save his wages from a part-time or summer job, plus birthday or holiday gift money, and might even have enough for a cheap car when he receives his license. Having a goal to save towards should spur him to save as much as he can.

2. Show your teen how to manage the money in his savings account. Demonstrate how to keep a simple account record by writing down the balance figure, and then keeping track of deposits and withdrawals in two different columns, with a third column for the new balance figures as you go along. This will teach him how to balance his check book in the future too.

3. Teach your teenager how to set financial goals and then work to reach them. Ask him to write a list of things he would like to buy for himself or as gifts with his own money, and then discuss timeframes for achieving these goals. He will feel encouraged to save money if he can see specific targets to aim for.

4. Help him work out long it would take him to save up for, say, a particular pair of running shoes. Once you know the price, ask him to look at how much he is putting away every month, and what he can do increase his savings. Then he can calculate how long it will take before he can go and buy those shoes. This will be a real learning experience for him, and will help him see how adults have to budget for everything they want to buy.

5. When your teenager gets a bit older and has proved that he can handle his savings account responsibly, it can be time to graduate to a checking account. Many banks will open checking accounts for teens provided there is an adult co-signer on the account. Giving him a “grown up” checking account can be a great way to drive home the fact that he is now a young adult, and not a child any more.

Related posts:

1. Borrow Payday Loans With A Savings Account
2. Using Your Savings Account to get a Payday Loan
3. Savings Account Payday Loans
4. Tips for Negotiating Credit Card Debt Reduction
5. 3 Ways to Get Out of Debt