Seven Ways You Can Teach Your Teenager How To Save
One of the most important things you must teach your kids early on is the importance of learning how to save.
By the time they become teenagers, the problem is far more difficult. At this point, peer pressure usually outweighs parental influence. How do you teach your teenager how to save without wasting your time or provoking open rebellion?
Fortunately, even if it is much harder, there are still many ways and means to boost the financial IQ of teenagers. Just keep in mind that much of the effectivity of efforts will depend on the personality and circumstances of your child. Do not assume that what worked for one person will do as well in your case. Here are seven of the most effective ways to your teenager to save money:
1. Be a role model. The most effective way to inspire financial responsibility is if you yourself show discipline in handling your money. Refrain from impulse buying. Have a list of items to buy when doing groceries. Moderate your spending.
2. Have him/her get a part-time job. The best way to get teens to know the value of money is to have them experience first-hand how hard it is to earn it. It is well worth your time and effort to help them find suitable work if they cannot do it on their own due to shyness. Just make sure they will be treated just like the rest of the workforce so that they will see how it is in the real world.
3. Supplement his contributions. There was a time when it was easy to show how much your money grows when you save a little amount regularly. Through the multiplying power of compound interest, it was impressive to see your money rapidly increase in value. Unfortunately, interest rates are now very low and relying on compound interest alone is not as motivating as during the time of high interest rates. You can give him a nudge by agreeing to match his savings with an additional amount, just to make it more appealing.
4. Do not give money too readily. Whenever you get a request for money or to buy something, always have him fully justify the expense. Probe if the item is really needed now and also if something cheaper could serve as well. Unless it is urgent, take some time to think it over. Having this attitude sends the message that you think carefully first before spending money.
5. Explain the problems associated with not acquiring the saving habit. Have a heart-to-heart talk with your teen and open up about your concerns about his growing up and having financial difficulties. Your teenager may think that when the time comes, he will easily be able to save. It is up to you to make him realize that good habits are not acquired instantly.
6. Give a monthly allowance. This advice may seem ridiculous to those who had been used to giving their children a daily or weekly allowance. Most of them will think that there is no way their teenager will be able to make it to the next allowance. In a minority of cases, this may not be feasible, but you would never know unless you give it a serious try. This forces him to control his spending or else suffer the consequences of running out of funds before receiving his next allowance. It is ironic that the success of this technique is dependent more on the parent than the child, as the parent must resist the urge to quickly give additional money. If you think that you would not be able resist, then better try some other way or your child will end up spending more!
7. Teach him how to budget. It would be best if you ask him to list his expenses every day for one month before you start giving his allowance on a monthly basis. This is so there is good basis for formulating the budget. The items that must be paid should be allocated funds first before those less essential. Among those to prioritize is a certain percentage for savings. It is an often said truth that if you save what is left after expenses, you will be left with nothing to save.
*Originally published by the Manila Bulletin. D-4, Sunday, October 27, 2013. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.