Savings Strategies for Kids and Teens

Kids grow up fast. It’s never too early to talk with them about the importance of saving. If you’re a parent (or grandparent), we bet you have a great deal of financial wisdom to share – things that you wish you had learned sooner or done differently.

When raising kids, there are many opportunities to start a conversation about healthy money habits such as saving for your goals. Not sure where to start? Here are six tips to consider. 

1. Set goals

What are your kids trying to save for? Whether it’s the latest smartphone, concert of the year, or a car, work with them to figure out how much they would have to sock away each month to reach their goals by a certain date. This is an opportunity to teach them the valuable lesson of setting realistic, time-bound goals; working hard; and exercising financial discipline in order to achieve them. Give our High-Yield Savings Account calculator a try to help them see how the more they save, the quicker they can reach their goals.

2. Create a budget

Once your kids have their goals in place, this is a good time to talk about creating a savings plan or budget. For kids and teens, earning your first paycheck or allowance is exciting, and they might be tempted to spend cash freely without much thought. Making a budget can help them get a clear picture of their spending and provide a good opportunity for you to teach them the difference between needs and wants. What types of expenses are necessary? What are simply “nice-to-haves” but not essential? Having a budget can also help them stay focused on their goals, reinforce good saving habits, and allow them to practice smart decision-making. For example, what trade-offs might they have to make today in order to help them achieve their long-term savings goals?

3. Open a savings account

A piggy bank is a good start, but a savings account is better. With young children, consider taking them to a bank once the piggy is full to open a savings account for them. This is a great opportunity to reinforce the importance of saving early and often. Better yet, explore a high-yield savings account, which could earn even more interest than a traditional savings account. This is also a great time to teach your kids how money can grow faster with compound interest.

4. Explore other savings tools

A basic savings account is a great way to introduce your kids and teens to the fundamentals of saving. When the time is right, you can broaden their horizons and introduce them to other important savings tools such as certificates of deposit (CDs). Check out our Guide to Savings Accounts if you need a refresher on how different savings vehicles can work together to help you reach different goals.

5. Make savings a habit

Talk to your kids and teens about the importance of saving for both future goals (e.g., a new laptop) and unexpected expenses (e.g., bike repairs). Although kids may not have to worry about building an emergency fund (let’s face it, you’re probably their emergency cash cushion for now), it’s not a bad idea to help them get into the habit of saving at least a portion of their paychecks or allowance for those unexpected expenses.

6. Save for retirement now

Many of us wish we started saving for retirement much sooner. For kids and teens, between going to school and keeping up with friends, it’s probably safe to say that retirement planning is not on their radar. But that doesn’t mean you can’t help them get started with a retirement account, giving them ample time to build their potential nest egg. If your child earns an income – for example, from babysitting or a summer job – you could help them open and contribute to a Roth IRA. See our Roth IRA for Kids article to learn more.

Bottom line

Developing good savings habits isn’t a one-and-done deal. It takes constant reinforcement. And it’s not enough to just talk at your kids about good habits. It’s also important that you are (or at least try to be) a good role model for them. Share your own experiences and challenges when it comes to managing money. Show them how you save for things like retirement, rainy day funds, and family vacations.

By having these conversations early and often, you can give your kids a head start in financial literacy and wellness.