Many of us look back at our teen years and think of the carefree times with friends, the first car we owned and our first love. For most people it was a time in our life that we didn’t have to worry too much and most likely, we rarely, if ever thought about saving the money we earned. Times however have changed, and if you have a teenager who will be earning money this summer it is a good idea to sit down with them and talk with them about money management and the importance of starting to save.

As adults, especially in today’s world, many of us are wishing that we had learned about money and its importance at a younger age. If we had only started budgeting our money, saving our money and investing it earlier in life, where might we be now? Budgeting, saving and investing money is a life skill that is a necessity and it is never too early to start learning.

Need vs. Want

Many teenagers would love to spend every penny that they earn. The first step in teaching them about the importance of saving is explaining to them the difference between a want and a need. A need is something that is necessary like food, clothing, transportation, shelter, etc. Wants for teenagers are typically expensive clothing and shoes, fancy cars, video games and various forms of entertainment. While it is ok to spend some money on our wants, it is important to learn self control and discipline in the form of financial planning.

Create a Simple Budget

Helping teens set up a budget for the money they will make during the summers of their teen years will be the foundation of how they earn and spend their money throughout their life. Teach them to set aside a certain amount of money each pay check for essentials and a few luxury purchases. The remainder, which should be a large portion of their paycheck, should go into savings.

While it may seem strange to have teens begin saving for their retirement, in this day in age it is practical and can help to greatly make up for the deficiencies that they will face come retirement age. With pensions and other benefits diminishing, it will be more important than ever before for the teen generation of today to start saving at a very young age.

Motivation to Save

There are a few different things you can do to help get your teen motivated to save their money. Showing them in black and white how their money can compound interest and turn into a small fortune for them by retirement age, is a good place to start. Just a couple of thousand dollars in savings from each of their teen years can multiple to a lot of money.

Some teens might be better persuaded by showing them what they could have now with their money ( which is not a lot) compared to what they could get with it later, after it has multiplied.

Even if your teen is resistant to the idea of saving most of their money now, it is important to push them to do it. Some day they will be thanking you.