If you’re a parent to teens, have you thought about helping them develop a savings habit? As your kids get closer to adulthood, embracing and becoming effective at saving could help with everything from self-reliance to discipline and confidence. Learning to save for both the short and long term could give your teenager important life skills, and it could help them get started on the path to financial security.
1. Mastering savings is a key financial skill
Learning to save is a fundamental financial skill because being an effective saver is essential for everything from managing expenses to long-term wealth-building. Without learning discipline, planning, and diligence, paying bills would be a challenge, not to mention saving up for major items like holidays and home deposits.
2. Foster self-reliance and independence
Encouraging your teen to be a successful saver could set them up for financial independence and self-reliance in their adult years. Since you're encouraging your teen to save for things they want to buy, it can help them become more responsible in general. By setting and achieving realistic goals, teenagers grow in confidence about their own power to achieve financial goals and direct their lives.
3. Encourage sensible spending and discipline
A good savings habit, along with budgeting, allows your teenage kids to develop discipline, a universal skill they can apply to other areas of their life. Reinforcing a habit by practising it over time helps it to last a lifetime. Having a disciplined approach to money could make it easier to distinguish between wants and needs.
Since money is finite and our wants often exceed our spending power, learning to save encourages your teens to think about things like trade-offs and opportunity costs, which could then lead to smarter spending choices. They could end up being better judges of whether something is a good buy, learning to avoid impulse purchases.
A teenager might better understand the value of something because they're forced to link the money they want to spend to how long it takes to earn or save. Teaching your teenager to set savings goals could give them a sense of satisfaction and achievement, leading to a cycle of positive reinforcement.
4. Many kids start earning money when they’re a teenager
Learning to save is important at any age, but it's especially critical for teens because that's often when they start earning an income for the first time. Whether it's a first job in retail, hospitality, or something else, your teen kids would do well to learn about saving by the time they start getting regular pay.
5. Prepare them for access to financial products
The teen years are also an important time for your kids to master saving before they have access to a whole range of financial products. When they’re 18, they’ll have access to a range of products that could include credit cards, payday loans, and mobile phone contracts. You'll want them to be fiscally responsible and have a degree of financial independence by then, so they make good decisions when it comes to new financial products.
And what better way to encourage money accountability than ensuring they're great savers by the time they turn 18?
6. Set money goals and achieve them
Learning to save includes teaching your kids how to set money goals to build wealth, and thinking about what they want their money to do for them into the future. While it’s easy for them to focus their present lifestyle, taking charge of some of their own spending and saving goals, aiming to look ahead at least three months, will show them to understand wealth in the long-term. Help your teens develop other positive traits like planning, goal setting, and delayed gratification by sitting with them and making a list of their financial priorities over the next one to three years. Devise a realistic plan and encourage them to stick to it.
7. Maximise the power of compound interest by starting early
Becoming a successful saver from a young age comes with long-term benefits, especially when it comes to growing a financial nest egg. The magic of compound interest means the earlier you start, the longer your savings have to grow, so event modest amounts can grow into a large sum.
Talk to your teen kids about how compound interest works over time and use actual numbers to illustrate its power. Show them how regular, small savings can be transformed into significant amounts over time, through interest as well as other options like investing and super.
Making saving a habit
The teenage years is a great time to help your children develop a smart savings habit. At this stage, your teen is likely to be either earning some money already or getting a job and earning money in the near future, and he or she will soon be able to access loans and other financial products. Helping your kids learn to save could also help them make better consumption choices, along with getting satisfaction from setting and achieving money goals. Finally, starting early with saving means your teens will have more time to fully leverage the power of compound interest to establish a solid financial future.
At Student Super, we understand that parents only want the best for their child’s future. That’s why we created a super fund that helps young Australians get a head start. Get started today