How to Start Saving Money as a Teenager

As a parent, you want your children to learn about the value of money. It sets them up for success and might even keep them from asking to eat out every night.

The perfect time for your child to start building up their financial literacy is in their teenage years, and the best habit they can build at this stage is saving.

We’ve all been there before. You get your very first paycheck, and you spend it all.

It’s normal not to think about saving at this point because spending can be so exciting. But, it’s important not to make that a habit. The more your teenager practices saving early on, the easier it will be for them to do so when it matters.

So, how can a teenager start saving money? How can you explain why it’s important? What advice can you give them to make it easier?

Does a teenager really need to start saving?

The short answer? Yes!

Because a teenager doesn’t have the same financial responsibilities as an adult, this is the perfect time for them to start their savings.

While they may not pay rent or health insurance, they will in due time. Setting up a security net for themselves in the first moments of becoming financially independent will save them a lot of stress.

Build healthy financial habits.

Once your child has opened a bank account and starts receiving their first paychecks, you can help them build healthy financial habits. Rather than spending what they earn immediately, they can start building the groundwork for financial success.

The first and most important habit to suggest is to set aside money from each paycheck for saving.

An easy rule for them to follow is to save at least 10% of whatever they earn. When they do that for each paycheck, they’ll have a steady pipeline of funds safely tucked away.

This is also a great time to cover a lot of financial terminology and concepts.

When they open a savings account, you can explain what compound interest is. When April hits, you might walk them through how to do their taxes.

The more chances you take advantage of to teach them about money, the more likely they are to make informed decisions later.

Prepare them for independence.

Having them take on their clothing budget, whether with their own funds or the parent’s funds can be good budgeting practice. That is how we got our daughter on board with thrift store shopping.

Saving will be a lot harder if your teenager doesn’t have long-term goals in mind. This is why you take the opportunity to help them create a financial plan.

A financial plan isn’t just a budget; it’s a goal-oriented savings plan.

When they practice setting long-term goals, they’ll have a much better grasp of things like investing and retirement planning later in life.

Start by asking them what their goals are.

Savings can be put towards moving out of the house, going to school, buying a car, and other important milestones. When they work towards a specific goal, they’ll feel motivated to save.

Show them how their efforts today will help them tomorrow! Savers who start early have an easier time being financially responsible when it matters and have saving set aside for important purchases.

How can a teenager start saving?

Open a high-yield savings account.

The first step to saving is opening up a savings account.

When there’s a designated space for saving, new savers will have a much easier time visualizing those savings and keeping them untouched.

Plus, they’ll accumulate more compound interest the longer money sits in a savings account.

Shopping around is important because not all savings accounts are the same. A high-yield account earns a higher interest rate, which means they make more over time.

High-yield accounts are typically offered at community banks that need to remain competitive.

Features to look for in a savings account include no minimum balance, simple transfers between accounts, and a high annual percentage yield (APY).

According to the FDIC, the national average savings interest rate is around 0.10%. Knowing that your teenager can look around for higher yields where they can find them.

Motivate your teenager to save.

When they lack motivation, saving may become a challenge.

Keeping goals in mind helps motivate saving, but that isn’t everything. Incorporating other strategies for motivation will only help them stay focused on their path to financial success.

You could suggest they participate in a savings challenge. For example, invite them to try putting away a fixed amount of money every week, which is returned at the end of the year. Just setting aside $20 a week will amount to $1,040!

There are many savings challenges to choose from, so figure out what would be fun for them.

If there’s no reward for saving, it can be hard for teenagers to see the value in it. So, try setting up milestones with them.

When they reach a milestone you’ve set, help them figure out how to reward themselves. For example, when they’ve saved up their first $1,000, they may want to use a quarter of it for pleasure spending while the rest remains in an account.

An easy way to motivate saving is to use an app like SaverLife, which gives out tangible rewards the more they save. For teenagers, this will be a fun challenge for them to see how they can maximize their rewards.

Help them create a budget.

Budget-setting is a key part of financial literacy. When they have a budget in their toolbox, they’re better informed about the money they have and how they spend it.

Have them look at their first few paychecks, and figure out how much they make a month on average after taxes are taken out.

Next, subtract required expenses from their monthly earnings. They may set aside fixed amounts for things like food, phone bills, and gas for the car.

Now, subtract the amount they want to save from their earnings that goes towards future goals.

Again, a good baseline is 10% of their earnings a month, but don’t discourage them from wanting to save more!

Now, they can see how much money is leftover after necessary expenses. This is what they can spend on the fun stuff: concert tickets, a pair of shoes, a new game. They should try not to spend more money than they have, and having this number in mind makes that much easier.

Use those student discounts.

Many organizations offer student discounts, so remind your teenager that they can always shop around for the best deals. This includes some of their favorite retailers like Levis, Aeri, and Nike.

Many subscription services, like Amazon Prime and Spotify, offer student accounts, too. By entering their school email into their account details, they can save on these subscriptions by as much as half.

Many other services offer student discounts as well. Public transit—for example—usually offers discounted tickets for students.

Other ways you can help your teenager save:

Show them how to look through their bank statement or their purchase history, identify how much they spend on different categories, and figure out ways to reduce unnecessary spending.

You can also help by creating a budget spreadsheet for them to plug in their numbers.

Saving is extremely difficult, especially when you’re learning to save for the first time.

Creating healthy spending habits early on makes it common practice in adulthood. If you want to add an engaging way to reward them for saving, have them sign up for SaverLife!

SaverLife is a nonprofit. When you sign up for the app, you can link your bank account, start earning points for saving, and put those points towards rewards.

SaverLife is here to make your teenager’s saving journey as easy as possible, so why not try it today?