Back in April, to mark Financial Literacy Month with its special emphasis on teaching kids to save, I started a series of columns with savings tips for young people of all ages:
I've saved teenagers for last, because they may be the hardest cases -- they're teens, after all, and their lists of wants tend to be long and expensive. Plus, they apparently face special pressures to spend their money rather than save it.
In a fascinating study by Junior Achievement after the last holiday season, teenagers admitted that they were willing to overspend on gifts in order to impress their friends, buy them something they "really wanted," or reciprocate for an expensive gift. So getting teens to save may require a few psychological tricks, as well as practical ones.
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It's best to build on small steps you've started earlier. For teens who are getting an allowance, it's time to expand their financial responsibilities to include the birthday and holiday gifts you used to purchase, plus their own clothing, concerts, gasoline and other car expenses.
Having to parcel out their own money puts a natural brake on spending and gives them a reason to save. Instead of splurging on presents, they have an incentive to come up with gifts that are less expensive and more thoughtful.
When my daughter was in the sweet-16 years, for example, her friend Kate specialized in making and decorating each girl's initials out of Rice Krispies Treats. The girls ate it up!
And set an example by keeping your own gift-giving reasonable.
Other savings tips:
- Give your teens a goal. In one recent survey, 9% of the teenagers interviewed said they expect to get an iPhone within the next six months. No reason for you to foot the bill: Have them use their own money.
- Match all or part of what they put aside. This is especially effective for iPhones and other expensive stuff.
- Clue them in to the cost of college. If they have a job, it's not unreasonable for you to require them to save a chunk of their income for college expenses.
- Encourage them to have their paychecks deposited directly. If the money gets into their bank account, it's more likely to stay there.
- Ramp up their interest -- literally. Open a high-yield online savings account, or introduce them to the stock market. Small investors can purchase shares through Sharebuilder.com or MyStockDirect.com, which links to more than 100 companies that sell stock directly to the public.
- Start an IRA. If your children have earned income from a job, they can contribute an amount equal to their annual earnings or $5,000 in 2008, whichever is less. You can seed the account, as long as you don't exceed their actual earnings. It's a great present for June grads, who can use our calculator to see how fast their money will grow.
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