4-Point Strategy on How to Save Money as a Teen Making the Big Bucks
It might sound far fetched, but it seems as though teenagers are coming to the rescue.
As the U.S. is attempting to bounce back from one heck of a year (and then some) due to the pandemic, employers who have been struggling to find help for their businesses are finding that teens are filling those roles. Most of those jobs seem to be in retail and hospitality businesses.
There are a lot of theories about why retail, restaurant and bar owners have had a tough time finding workers, some of it based on data and some of it based on conjecture and politics. Whatever the reason, businesses that opened quickly and en masse are scrambling to find help.
Some are offering sign-up bonuses and higher wages. As in, teens can make more money — upwards to $17 per hour in addition to signing bonuses.
To make this good news even better, some employers are lowering the minimum age for applicants.
For example, some water parks allow applicants as young as 15, offering opportunities for those who may have had to wait in the past for a few more birthdays. Some even offer ways to submit an application much faster, offering teens the opportunity to fill out a form using their smartphones.
4-Point Strategy On Getting Your Teen to Save Money
As your teen rakes in the dough, it might be a good idea to have a chat about what they’ll do with the extra cash. Sure, they can spend some on fun stuff, but setting a certain amount aside for larger expenses like a car, college tuition and even a retirement account. With your guidance, they could start off on the right foot financially.
Here are some ways on how to save money as a teen.
1. Work Through Short and Long-Term Goals
If you haven’t talked to your teen about spending and saving money, now is the time to do so. With a bigger paycheck, your teen may be tempted to spend all of it, or feel lost when it comes to figuring out what to do with the excess cash.
To start, you can show them the difference between short-term, long-term and even intermediate goals. Then, have them walk through what is important to them, and to prioritize spending and saving money that way.
For example, if your teen really wants to buy a car, have them look at prices of cars, insurance and monthly gas expenses. Talk about what’s important and how much money they’ll need to set aside each month (aka avoid too much debt from high car payments).
Maybe retirement is too far away, but saving for college is a reality for many teens — this is a perfect opportunity to discuss long-term goals and how much money it takes to achieve them.
Once you’ve helped them map out their goals, then you can look at products and services that can help your teen achieve them. That way, you’ve set the foundation by teaching them how to create good money habits that are relevant to them.
2. Stop Them From Opening Any Ol’ Bank Account
Opening a checking or savings account is great (your teen does need somewhere to send that paycheck), but getting one at your local bank may not be the best choice. There are plenty of choices that give your teen the chance to earn interest.
In fact, talk to them about the miracle that is earning interest (hello, free money!) and how much of a difference it can make to park their cash in a high-yield savings account. The two of you can sit down and compare how much your teen can save just by putting their money in a different account.
For example, a traditional bank account may earn a measly 0.05%, whereas an online bank account like Varo can earn at least 10 times that. Plus, your teen won’t have to worry about a monthly fee or hitting a minimum balance amount.
3. Let Them Choose Their Own Stocks
Investing can be fun but you and I both know that it can also be boring, especially when it comes to growing wealth in the long run.To encourage your teen to invest, you can start off by showing them how they can turn their paycheck into tens of thousands of dollars thanks to the power of investing.
Remember the miracle that is earning interest? Show them what compound interest can really do to their money and you could blow their minds.
To make it a bit more fun, you can have them invest in individual stocks. More specifically, fractional shares of stocks as they’re cheaper and your child can have their pick of more. Opening an account together like the ones offered by Stockpile gives your teen a chance to check their own account to see how their fractional shares are doing.
The good news is that Stockpile also offers ETFs, helping them to diversify their portfolio. There are also Roth IRA accounts if your teen would rather have more options with a brokerage account. You can walk them through why diversifying is a potential lifesaver, especially if they’re worried about losing all their money from one stock.
4. Talk About the Virtues of Automation
Who doesn’t love it when someone or something automatically does something that benefits us? That’s where finance apps come in.
If your teen finds it hard to save even a small fraction of their paycheck, show them how apps like Chime and Qapital and how it can help them set goals and automatically help them save.
Qapital is fun because it allows you to set savings goals based on behaviors, like sending a few bucks to a separate savings account each time your teen walks to work.
Or with Chime, your teen can have it so that each time they make a purchase, the app will round up their purchases and send the difference to a separate savings account.
Teaching your young adult how to save money as a teen is simple (and dare we say fun) as long as you set the right foundation. Make sure it’s tangible, relevant and that you’re giving them the autonomy to choose their own money saving methods. Both of you will be surprised at how much will be in their accounts.
Contributor Sarah Li-Cain is a personal finance writer based in Jacksonville, Florida, specializing in real estate, insurance, banking, loans and credit. She is the host of the Buzzsprout and Beyond the Dollar podcasts.