Teaching Teens to Save Money

Young saver

In this age of consumerism, when everyone wants the newest iPod or flat screen TV, teaching teens to save money can be difficult, not to mention underappreciated. However, with the costs of cars, college tuition, homes and even gas on the rise, it's more important than ever.


One of the most important skills in teaching teens to save money is budgeting: showing them how to save money to buy the things they want, now and in the future. There are three main steps to budgeting:

  1. Setting goals: In this stage, teens write down a list of five-to-ten short-term financial goals. Examples might be a prom dress, concert tickets or a new pair of sneakers. Then they do the same thing for long-term goals, such as a car, college or graduation expenses. Teaching teens to put their goals in writing makes the goals seem more real and can motivate them to achieve them.
  2. Creating a savings plan: Once the list of goals is ready, the teens will need to write down the estimated cost of each item. A little research is in order so the amount is as accurate as possible. Then the teens' task is to figure out how much money they have to save each month to make that goal a reality. A spreadsheet or calendar is a great way for them to track how they're doing.
  3. Reducing expenses: In order for teens to appreciate the value of money, they have to learn that current spending affects future savings. As the final step of the budgeting exercise, they should determine their current spending habits by making a list of what they spend money on each week. Then they should look and see what they can cut back to realize their savings goals faster. They can use a budget worksheet to put everything down on paper.

Paying Themselves First

Another important aspect of teaching teens to save money is instilling in them the value of paying yourself first. This means that a portion of all money teens make, whether it's from a part-time job, an allowance or a gift from a family member, should go directly into a savings account. That way teens will end up with a sizable sum, perhaps to put towards buying a car, before it has a chance to disappear into another shopping spree.

Student Credit Cards

If teens are old enough to secure one, a student credit card with a low limit, say $500, can be a great teaching tool. Parents can talk with their teens about the importance of repaying debt on time, looking over statements and not overspending. Teach teens that credit card spending is just like taking out a loan, so they need to consider that before making purchases. Plus, it's better for them to understand credit before they get bombarded with offers in college.

If teens aren't ready for credit cards yet, parents can supply them with prepaid debit cards instead. The limited funds can make teens think before they buy.

Teaching Teens to Save Money by Example

If teens' parents live extravagant lifestyles, it can be difficult for them to learn to respect money. It's easier for them to learn good financial habits if they see their family practice frugality. Some ways for parents to pass on this value are by:

  • Planning family activities that don't cost a lot of money, such as game nights.
  • Shopping at discount stores and clipping coupons for groceries.
  • Looking for good deals in store circulars and comparing prices before major purchases.
  • Reusing or recycling household items instead of simply throwing them away.
  • Buying quality goods that will last a long time instead of jumping on the next big thing.

When parents actively involve teens in these types of behaviors, they can teach them to save without sounding preachy. This can spare everyone the dreaded eye roll.

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Teaching Teens to Save Money