Budgeting Tips for Young Adults: A Parent’s Guide

A big part of adolescence is the excitement of becoming more independent than ever before, from going out with friends alone to learning how to drive. This is especially true for financial independence. Having money and financial independence is a new frontier for young adults, so learning how to build their saving habits early is especially important.

Studies have shown young people want to learn about money, but this guidance isn’t available to them. While youth savings programs are becoming more promising, it’s also great to guide them at home!

Need some help teaching your young adult how to budget and save? Here’s how you can help your teen create lasting habits that build their savings.

Create lasting habits for the future

Encourage your young adult to practice spending and saving

Allowances are fantastic practice for healthy money habits!

When introducing a fixed allowance to your teen, help them plan what they’ll do with that money. Setting aside a small part of their allowance every week to use in the future is a simple way to get them used to saving toward their goals. Instead of giving them the money to buy what they want, give them money so they can save for what they want.

Talk to them about the difference between short-term and long-term financial goals.

It’s easy for them to learn how to save for a video game, but it’s trickier to learn how to save for a car. They might even want to start saving for college! By showing them how to set reasonable goals, you demonstrate the value of saving over splurging.

Have them start with a fixed amount to save each month.

A fixed amount to save a month, like a dollar amount or percentage, makes it that much easier for them to save often. Many savers try to save 20% of their income a month, so work with them towards that goal. Since young adults have fewer necessary costs to worry about, they may have the flexibility to set more aside for future goals.

Habits must start small, though.

Start slow with basic saving habits in small amounts. Once they get a good feel for it, add more sophistication to their budgeting by increasing the amount they set aside or adding additional steps to their budgeting, like creating spending and savings categories.

There may be a learning curve here, so be patient and encouraging.

Practice tracking expenses

It’s easier to understand your spending habits when you consistently track your expenses.

Your child may not realize how much they’re spending in certain areas because they haven’t practiced tracking their spending before. Encourage them to keep track of their spending by writing down what they buy or saving receipts.

If they’re old enough to have a checking account, this becomes a lot easier, as they can look at their bank statements or spending reports. When they look through them, they can create spending categories based on their habits and look to reduce spending in those areas.

Not all young adults will be immediately receptive to this.

They may think you’re invading their privacy or reducing their financial independence by asking about their spending. It’s important to create a healthy environment for money talks. You may start these talks by saying you didn’t realize how much you were spending on restaurants, shopping, or coffee, and you want them to avoid being discouraged like you were.

Avoid judging them for their bad spending habits, and instead, reward them for good financial choices. It reinforces positive behavior without focusing on the behaviors you want them to move away from. Just like dieting and exercise, having rewards for achievements along the way keeps you motivated to keep going!

Explain credit to them in a meaningful way

The concept of credit is confusing for most adults, let alone teenagers. Credit card companies can take advantage of this with predatory interest rates that force young adults to accrue debt, which can destroy their credit before they start adulthood.

If your child asks about a credit card, make sure they know how to handle cash and a checking account before this.

However, credit isn’t bad. In fact, getting them started on their credit journey early is the best way for them to make healthy credit decisions when it matters. It just needs to be managed right. Offer advice on how to handle and protect their credit. You can even make them an authorized user of your credit card.

Help them open their very own student credit card if that isn’t an option or if you’d like to add an additional element of independence.

These usually have a low-interest rate, but they also have a low credit line. Encourage them to make only small charges to their credit card that they can pay off easily. Teach them the value of clearing their credit card balance every month, so they don’t face debt too soon.

Help them build up their savings

Try saving with them

Saving is a great bonding activity for you and your child, especially as they’re nearing adulthood.

While you can offer them insights into money management, you can also participate with them in their savings journey! This is a great way to not only keep them accountable but also make yourself more credible. If they see you making smart decisions, they’re more likely to emulate them.

Start with a monthly savings challenge. Young adults love a little competition, especially with their parents.

Decide on a dollar amount and a timeframe for you both to work towards. Try upping the ante by putting prizes like treats or a week off of chores on the line.

You can also reward them for their saving by saving for them, too. Tell them whatever they save during the month, you’ll match it to a certain percentage (this is also a good time to explain a 401k). You can even sign them up for a high-yield savings account and explain how they work.

If you need a fun way to save with your young adult, try SaverLife! It’s an app that rewards users for saving money with cash and other rewards. They’re always on their phones anyway, so you might as well take advantage of that with a fun app to help them save.

Show them the value of having multiple income streams

Their first job is a great time to teach them the value of money, but you can also encourage them to pick up some side hustles.

The more sources of income they have, the easier it will be for them to save. Plus, you can use this as an opportunity to promote their interests!

If they’re looking for something to add to a college application, tell them to try tutoring at their school, community center, or online. If they have a lot of clothes they want to get rid of, encourage them to try selling them online or at local resale shops. If they have a license, have them try out a food delivery service to wrack up tips.

Your young adult has interests that will inform the career they pursue later on. This is a good time for them to start working toward building experience for that career.

If they’re a photographer, have them look for photography opportunities that they can add to their portfolio, like taking photos for classmates’ special events or doing cheap headshots for local professionals.  If they’re learning how to code, they may try looking for web development opportunities. All of these provide great experience and even some passive income.

If they’ve saved a lot and want to continue to build on their money, they may ask you about investing. This could start small, like buying a bond, and then trying out a stable index fund. Just like credit, getting them acquainted with investing early is going to help them a lot in the future.

Help them succeed with additional support

As a parent, you want to see your child making healthy financial decisions. Because of how few responsibilities they have as a young adult, this is a great time for them to learn how to manage money. The more they practice this before adulthood, the more they’ll behave accordingly as an adult.

Nowadays, with information so widely available, there are tons of resources that your child can take advantage of to learn more. If you’re looking for a community of star-savers, point them to SaverLife! Our community is all working toward the same goal: becoming financially literate and resilient. Plus, there are plenty of rewards and challenges your young adult can take advantage of and win cash prizes for completing.  Sign up for SaverLife today!