Are your teens growing up to be money-wise? No longer children but not quite adults, they can now understand what money can do, yet they may not fully grasp its value.
Having been dependent on their parents for almost everything, they may not realize how hard it is to earn money. It’s pretty common for teenagers to ask for expensive gadgets and clothes from their parents, not understanding that these can be way beyond their parents’ budget.
The good news is your teenagers are in a learning phase where they can absorb the savings habit before jumping into the real world. The best way to educate your teenagers on money issues is to let them experience how it is to earn and save money on their own. One good way to let them do this is to set a goal, say saving P10,000 a year.
You might think this is not easy, and your teenager will likely agree with you – but the truth is P10,000 is a very modest savings goal, as we will illustrate here.
Yes, even teenagers who are not yet earning, but receive allowances and gifts, will discover that this is a realistic goal. The sum of P10,000 is not too difficult to attain – by saving P200 a week, they can easily come up with this amount within one year.
Here are eight simple steps to get you and your teenager to raise P10,000 after twelve months:
1. Open a savings account for your teenager. Make sure your teenager will be able to safekeep his or her money. The best way to do this is to have a savings account, which your teenager should be able to open with your assistance. Choose a bank with a small opening requirement and with online and mobile services to encourage your teenager to monitor her or his funds.
2. Introduce budgets and how they work. Show your teenager how to create and manage a personal budget (e.g their allowance), by knowing his or her own spending habits. This entails finding out how much she or he gets in allowances and how much he or she spends on school days, as well as on weekends. This will give your teenager an idea of the resources that are available at his or her disposal.
3. Teach priorities. This early, teach your teenager how to let go of unnecessary expenses so that she or he can learn to prioritize. Some of the things that your teenager can drop are soda (P20 a day, or P100 per week), cell phone load (P30 for 3 days), or visits to the fast food joint (where meals cost anywhere from P100 to P250, depending on what was ordered). Savings of P40-50 a day could add up to P10,000 in savings per year.
4. Discover rate shopping. Encourage your teenager to find more affordable alternatives to those things that he or she usually buys. At the fast food outlet or restaurants, show your teenager the less pricey alternatives to the top-of-the-line item he or she usually gets, such as the P100 budget meal versus the P250 upsized order. Take them to the grocery, and pick a product and show how the same item can be priced differently depending on brands and house brands. Strategic substitution will let your kid realize his or her goal.
5. Give your teenager opportunities to earn. It’s time to let your teenager understand that money is earned by giving him or her an opportunity to do so. Tutoring another child can yield P350 -P500 an hour. Teaching sports, walking someone’s dog, or watching over young children present earning opportunities. Just an hour of work every weekend could mean P1400-P2000 a month, which will let your teener get past the P10,000 goal in less than half a year.
6. Offer a matching program. To make things more interesting, offer to give the amount she or he raises at the end of every month. To reach P10,000 that means he or she needs to save around P450 a month, which translates to about P120 a week. Your offer to match their savings will hopefully encourage them to save more and will let them reach their goal of P10,000 faster.
7. It’s never too early to invest. Let your teenager earn from investing. If he or she receives cash gifts from relatives, encourage your teenager to put these into a mutual fund, and see how this can grow in a year. Better yet, open a fund for your teenager, which you can do with just P5,000. Let your kid put money into this fund each time his or her savings reach P1,000, and let them enjoy how money could appreciate in value.
8. Download apps to track savings and expenses. As most teenagers are heavy mobile phone users, introduce them to fun apps and online sites to help your teenager check his or her finances, and put fun into the saving game. Encourage them to monitor their money weekly by looking not only at savings, but at expenses as well. This will help lay the foundation for personal budget-setting and monitoring.
Still not convinced you can reach the goal? Consider this:
Put your child on the right path and encourage savings while he or she is still young and already has the means to do so. Raising a financially responsible individual is not only good for your child but is also your contribution to a better society.
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