Kids' Savings Strategies: Preteens through Young Adults
Monday, April 15, 2019
Today's young people are, by any objective assessment, woefully underprepared when it comes to matters of personal finance—saving in particular.
Not convinced? Well, hear us out.
Only 17 states in our union require personal finance courses for high school age students. And that lack of preparation shows. (Consider, for a moment, the fact that a whopping 41% of Americans haven't saved enough to deal with surprise expenses.)
The only remedy is more knowledge. And financial literacy, like any learning project, is not something you can achieve overnight.
If your children are still in school, or if they've graduated and are attending college, there are plenty of common-sense tactics they can implement to become savvier with money.
Let's break them down by age group. Ready to dive in?
Kids and Preteens, Age 10-12
You know how they say it's easier to learn a language when you're younger, because your brain's more elastic? That logic bears out when it comes to finances, too.
It's never too early to start your child on a healthy saving regimen—particularly if allowances are built into your monthly budget. They're the perfect teaching tool.
Make rewards concrete, rather than abstract
The benefits of savings may be readily apparent for you, as an adult, but this could be a tall order for younger minds—particularly for those accustomed to instant gratification.
Next time your child asks for something expensive, whether it's a toy or a video game, make them save up their allowance to pay for it themselves.
You've got a retirement account, right? Even if you don't, you're probably familiar with how they function in terms of employer contributions.
Apply the same principle to your kid's savings account.
By offering to match contributions for your young saver when they make regular deposits—similar to what your employer offers in exchange for socking away a bit of your paycheck each month—you could incentivize thoughtful, longer-term financial planning from your kid.
Teens, Age 13-17
After they celebrate their thirteenth trip around the sun, it's time for your kid to start putting away money in earnest—not just in a piggy bank, but in an actual bank.
Yep. That means opening a savings account.
Now that they're a little older and may even have jobs outside of school, the concept of money and the importance of saving may not be so abstract anymore.
Meaning, you don't necessarily have to demonstrate the benefit of saving with a "prize" at the end of the process; they understand it's an ongoing responsibility, and that there's immeasurable benefit to be had in greater financial security.
Encourage them to take the 52-week money challenge
Nothing makes the power of consistent contributions more tangible than the 52-week money challenge. Here's a breakdown of how it works, and why you should encourage your teen to take advantage of it if they have a steady source of income:
- Encourage your teen to make weekly contributions
- Amounts should correspond with what number week of the year it is ($1 for week one, $2 for week two, and so on)
- At the end of the year, they'll have saved $1,378!
Need a secure testing ground for your teen to hone their financial abilities, and to participate in the 52-Week Money Challenge? Open a Y Savings Account through SAFE.
Designed for ages 13 through 17, Y Savings Accounts offer all the benefits of Regular Shares Savings Accounts—including a $5 minimum opening deposit and a 0.20% annual percentage yield—with no service fees for dormant accounts.
Young Adults, Age 18-29
We know it's tempting, but—once they've reached this age—exercise your powers of restraint, and try not to intervene on your child's behalf too much when it comes to financial matters. Particularly if they're not asking for your help.
This is the age of independence, after all, when they need to start assessing their spending habits and making responsible choices for their financial health on their own. That being said, here are a few basic tactics that could help them along the right path.
Establish an emergency fund
Remember when we said that 41% of Americans haven't saved enough to deal with surprise expenses?
It's essential that your young person start building up an emergency fund—separate from their main savings account—so their earnings aren't wiped out whenever they encounter those (inevitable) unexpected costs.
Install automated deposits
Trust us—unless you install automated deposits, there's not going to be anything left in that checking account at the end of the month, because you'll have spent it all.
Encourage your young person to limit the worry (and the hassle) surrounding deposits by ordering your bank to do all the work for you, automatically and painlessly, after you receive each paycheck.
Aside from saving, there are plenty of other financial strategies it would be most helpful to implement over the course of your child's upbringing.
Opening a credit card at age eighteen, in particular, can really make a lasting impact. Building a positive credit score early in the game will make their lives so much easier when it comes time to make those big mid-twenties/late-thirties purchases: new cars, homes, and so on.
In the meantime, there are plenty of other ways to take your child's financial literacy lessons to the next level. Explore the youth investment options available through SAFE today. Happy saving!