You don’t want your teen to go off to college with no idea how to budget, save, or make income. College is expensive and your teen will have to learn how to function without the bank of Mom and Dad backing them up every step of the way.
One of the best ways to prepare them for more financial independence is to teach them how to build savings for big ticket items and rainy days. Here are a few pointers to help your teen prepare for college through money-saving strategies.
Get Your Teen a Bank Account
By the time your teen is thinking about college, they should most definitely have a bank account set up. Even if they do have their own bank account, we suggest taking them to a local branch of their bank and introducing them to a teller or customer representative so they can ask questions about how their account works and what features the bank has to offer. One of these features might be interests rates, which you should help your teen understand so they can take advantage of them to help their savings grow.
Banking is a lot easier with the help of mobile apps. Since your teen is likely on their phone throughout the day anyway, we recommend getting your teen familiarized with their bank’s app. Try going through your teen’s statement with them and help them track their spending so they know how easy it is to lose track of savings. If they can get in the habit of checking their bank statement and savings regularly, they might be more conscientious about how much they’re spending.
Introduce Your Teen to Budgeting
Budgeting is the true key to savings because it teaches your teen how to forecast where their money will end up. You could incentivize your teen to learn about budgeting by pointing out pricey items they have on their wish list like a new phone, car, or instrument, and how they might raise the funds to purchase it. Your teen can spend their money as quickly as they want to, but if you encourage them to put away a little bit of savings each month, they can calculate how long it will take to purchase something off their wish list. Reframing saving as budgeting for a big purchase might prevent your teen from bad decision making with their money. Being able to sacrifice going to the movies or going out to eat every day to budget for a new car will teach them the value of building savings and influence them to be smarter about saving up for college.
There are a variety of apps that help with budgeting too. You could suggest they download new software to help them determine a figure for their monthly income and track their spending so they know if they are generally spending more or less than they earn.
Show Your Teen the Cost of Things
A lot of teens are clueless about how much basic survival really costs. If they don’t pay for gas, utilities, food, or clothing, they might have a skewed view of how much money they should save for college. To get around this misconception, we suggest having your teen pay for their own stuff. The more they have to pay bills and use their own savings to get the basics, the more they will want to have a safety cushion in their bank account.
Another way to teach them the true cost of living is to introduce your teen to your own family budget. Show them where your money ends up and how much money it takes to sustain a family. This is a huge educational moment for your teen and they might appreciate money management skills even more as their brain develops. Plus, they will have a better idea of what living on their own in college might cost so they can budget accordingly and start saving.
Make Your Teen Get a Job
The only ways to save money are to reduce spending, or increase income. As your teen becomes more aware of their monthly spending, they might want to have the freedom to spend even more or start saving for the future. And what teen doesn’t like having more money? This is where picking up more jobs comes into play.
As a parent, you can help your teen get a new job by teaching them how to build a resume and figuring out what your teen might enjoy doing. Maybe you could introduce them to a friend with a business that is looking extra help, or maybe you drive them to the mall with a stack of resumes. It’s important to help your teen land their new job so they can start getting excited about the extra income without being discouraged by a fruitless job hunt.
With more jobs under their belt, your teen will build their resume for future jobs that can help sustain them in college, while building up their savings account. Additionally, you don’t want them coming to you every time they run out of cash. Demonstrating that getting a new job is a great way to boost their savings could inspire them to find more ways to earn money other than asking Mom and Dad.
Before you know it, your teen will have an awesome savings account that they can take with them to college. By using budgeting techniques, making them responsible for their own expenses, and giving them some tips to increase income, your teen will be much wiser about their money. The more they learn to save while they’re young, the less likely they are to run into financial problems down the road, giving them more freedom to enjoy college life.
P.S. Many thanks to Andy Earle for providing this post. Andy is a researcher who studies parent-teen communication and adolescent risk behaviors. He is the co-founder of talkingtoteens.com and host of the Talking to Teens podcast, a free weekly talk show for parents of teenagers.