Parents have a responsibility to teach their kids and prepare them for a life of independence. When their children become teenagers, the need becomes even more urgent. Teenagers need to learn to drive, date, maintain friendships, study, and manage their first jobs. With so many pressing topics, it’s understandable that many parents don’t teach their kids much about money.
In many cases, parents simply don’t know how to approach the topic in ways that help their teens understand the benefits of financial literacy. Fortunately, one local credit union is now offering a program designed specifically for teenagers. As part of its Savings for Success program, Utah First offers videos, articles, and other resources aimed at helping teenagers understand the following basic money principles. To help them get started on their journey of financial independence, they are even giving teens $100 to start their own personal savings account.
Earn (and Learn)
Every financial journey begins with earned income. To accomplish every other goal, and to achieve independence, teens need their own source of money. While that may start with an allowance or pay for chores, many teens will eventually benefit from working a part-time job, where they’ll exchange hard work for a paycheck.
Of course, early on in life, earning should not become their only focus. When the cash starts coming in, some teens might be tempted to prioritize earning above other things in life. While they’re young, they need to balance earning with learning. Education has been proven to increase earning power in the long run, so it’s important for young people to keep working hard at school and to consider college or trade school when they graduate.
Once teens start earning their own money, they’ll probably feel justified in buying a few things for themselves—and that’s great! But it’s easy to get carried away, and parents should teach their teens that overspending is one of the fastest ways to destroy financial progress. According to recent research, the average teen spends around $2,391 each year, and today, with social media, advertising, and other influences, there’s a constant temptation to overspend and overconsume. Teens should remember that media isn’t real life and they don’t need all the things they see being sold.
At the most basic level, the math is easy—they shouldn’t spend more money than they earn. To keep spending under control, they may want to track their expenses and keep a budget, or a plan for where they’ll spend their money.
Save, Save, Save
Once they’ve mastered the ability to spend less than they earn, they’ll need a plan for what to do with the difference. This is where financially successful people really shine—they save their money. To get started, parents should take their teens to a local credit union or bank to open up a savings account where they can deposit the money that they don’t spend. In the account, their money will earn a little bit of interest and will continue to grow. As their teens master the art of saving, parents might consider teaching them the basics of investing, including higher yield savings accounts, stocks, bonds, and real estate.
Credit is probably the most complicated concept that teens need to start learning and it’s a mystery to many young people. Credit, of course, is what credit unions, banks, and others use to decide whether to loan money to potential borrowers. An individual’s creditworthiness is reflected as a credit score, or a number used by lenders. While they likely won’t be borrowing money right away, teens should understand the importance of paying bills on time and not spending irresponsibly with credit.
Teenagers have a lot to learn and their parents have to balance their efforts across a lot of important topics. As a result, many parents aren’t teaching their kids the basics of personal finance. To help local teens, Utah First Credit Union offers educational materials that teach these basic principles of financial success. In alignment with its community-focused mission, the institution is also giving teenagers $100 of seed money to start them on a path of savings. Equipped with a little knowledge and an actual savings account, teenagers will be well prepared for future financial success.
Click here to learn more about the Savings for Success program and about how your teenager can get $100 simply by opening a new account with Utah First Credit Union.