Employment offers teenagers benefits beyond the paycheck and the hands-on training in job skills and work ethic. Summer jobs present an especially great opportunity to help your teenagers learn valuable lessons in money management. Working to earn their own money can inspire your kids to get in the habit of saving and making smart spending choices. These three tools will help them succeed.
1. Savings Account
One of the most important things you can do to help teens form the saving habit is to assist them in establishing an automatic savings account. Some banks offer special checking and savings accounts for teens, including setups that allow parents to track activity.
A 2016 research study by C+R Research Services and America Saves for Young Workers offers hope that once a teen worker starts learning to save, the lesson will stick. The report found that participants in a program designed to encourage youth workers to save continued the practice after their summer jobs ended. Eight months later, 61 percent of the group said they had made a savings deposit in the previous month, even though only 38 percent were formally employed when the survey was taken.
2. Financial Goal Setting
The importance of saving money is easier to understand when you have a purpose for putting it away. For your teen, the reward for stashing cash might be a new cell phone, a car, a coveted collector’s item or funds for college. Some might even be ready to take the really long view and start saving for retirement. They can contribute all or part of their annual summer job earnings, up to $5,500, to a Roth IRA, as this Kiplinger article notes.
Encourage some thoughtful consideration of how they want to use the money they save, and remind them of that goal whenever they’re tempted to stray from the plan. When they do decide to spend some of their summer earnings, you can suggest smart consumer moves like researching their options, comparing prices and deciding which purchases should take priority.
3. Incentives to Save
If your teen needs a bit more than self-motivation to start saving, consider what you can do to make the idea more appealing. If you’re financially able, you might offer to match their savings, either dollar-for-dollar or by a smaller percentage. Look for online money management games and apps that add an element of fun to the process of saving. And be a savings role model: Talk about a goal you’re saving for, what you’re giving up to get it and the progress you’re making.
Summer jobs offer teenagers a chance to start building the saving habit. If you take steps to ensure your teen understands money matters now, it’s a gift that will benefit them at all life stages. While parenting a teen is never easy, one day they’ll thank you for setting them up for a lifetime of financial success.