As parents, we teach our children the important things they need to know for success. Good manners. Good attitude. Be respectful to others. The list goes on.
Financial habits are important, too. The earlier we teach children and teenagers the value of money, the better prepared they are to budget and save when they become adults.
Every teen looks forward to the freedom that their first job brings and that first paycheck. But few know what to do with their newfound income.
At Regions Bank, financial education is part of our commitment to community engagement. Whether it’s virtual seminars, or, before the pandemic, in-person visits to schools, across the area, we work to connect with students and provide them with interactive, relevant tools to help them learn the essentials of managing money. Some examples of schools we’ve worked with include Millsaps College, Meridian Community College, Hinds Community College, Mississippi State University, Pearl Lower Elementary School and Canton High School.
Here are five practical lessons for responsible money management.
1. Develop a Savings Habit
Teenagers should pay themselves first by putting a certain percentage of the money they earn into a separate savings account. Getting used to setting aside 10% will prepare them to create an emergency fund, save for their first home and set money aside for a rainy day. You can also instill the value of philanthropy by encouraging your teen to give to an organization of their choice. If your teen’s employer offers direct deposit, show them how to set up an automatic transfer of funds from every paycheck into a separate savings account. If your teen needs an extra incentive, you could offer to add 1% or 2% to the total they save over a set period of time.
You might also consider helping your teen set up an automatic savings app. There are many reliable savings apps available for free or a very low price. By linking their account, your teen can make savings goals and set triggers for an automatic deposit, at which point the app could move money from their checking account to their savings account, for instance. Or the app might round up transactions to the nearest dollar and sweep the difference into a savings account.
2. Use Online Learning Resources
There is a wide variety of online tools to complement what you share with your children. For example, the Consumer Financial Protection Bureau manages the ‘Money as You Grow’ site to help prepare children “to live financially smart lives.” It offers activities and resources that make it easier to talk to kids and teens about spending wisely and saving money. Similarly, the Financial Industry Regulatory Authority offers videos and games designed to teach teens and adults about topics like budgeting, saving and the power of compounding interest.
Regions’ financial education program, called Next Step, is another valuable resource. At www.regions.com/nextstep, teens and others can find important tools and activities to help set goals, track finance habits and learn new money management skills. The resources are free and available to everyone.
3. Differentiate Between Needs, Wants and Wishes
The ability to distinguish between needs and wants will help your teen become a smart spender. Today’s teens live in a world of immediate gratification, so parents should explain financial goal-setting, which includes wishes, wants and needs in both the short term and the long term. Having conversations about needs and wants with teens not only helps them differentiate between the two but also teaches them to evaluate and make better financial decisions — such as opting for a more affordable used sedan over a shiny new sports car.
4. Keep a Record of Spending and Saving
You can use a simple system to help your teen track spending: Mark 12 envelopes to correspond with each month of the year. Then ask your teen to save each month’s receipts in the appropriate envelope. This will allow them to review purchases, evaluate past buying decisions, and recognize when they could have spent more wisely. This exercise will help your teen improve spending habits over time. Perhaps they will think twice about spending money to eat out for the third time in a week and put that money into savings instead.
5. Establish a Financial Plan Together
When it’s time for your teen to decide how to spend money, have them set specific financial goals. Whether they want a bike, a first car, or to prepare for college expenses, setting a clear goal will give your teen a better understanding of how much they need to save on a regular basis to reach that goal on time.
The earlier you begin talking to your teens about money, the better equipped they’ll be to make smart financial decisions as adults. Regions’ associates are available to help as well. Visit any of our Jackson branches to meet with a financial professional and learn more about helping your teen establish good money habits.