School’s Out, Summer Jobs Are Starting. Teach Your Teens About Money in Five Easy Steps.
We all have money goals. Today’s movie and snacks with friends or first car could be tomorrow’s college tuition or down payment on a house. And the path toward those goals is really the same: save money from the start, spend less than you make.
Whether your kids earn an allowance at home, work odd jobs for neighbors (think lawn care or babysitting), or have a job that earns an actual paycheck, here are five tips to help them spend their money smarter and learn life’s financial lessons early.
- Help them set goals. When you have the “why,” saving money is easier. Work with them to identify a short-term, mid-term, and long-term goal. Maybe it’s Saturday shopping with friends, new clothes in the fall and a new-to-them car. Work out a plan identifying a percentage to save from each paycheck or job, and how much can be used for “fun” money. Then make them earn it. The less you dole out cash, the more they’ll learn its value.
Now’s also a good time to teach generosity by encouraging them to set aside a small amount for charity — whether tithing at church, buying a bag of food to donate to a food bank, or contributing to a younger sibling’s school fundraiser.
- Find a bank. Go with them to open an account. Umpqua Bank, for example, offers accounts ideal for customers under 18.
“Ask your bank what they offer for those just beginning to learn to manage their money,” suggests Justin Burns, Product Manager at Umpqua Bank. Look for features like whether the account includes an ATM card only or an ATM debit card and check writing, and even whether there is the ability to earn interest. More robust accounts, Burns adds, are ideal for older teens who are “ready to begin banking and saving for their next stage of life.”
Also ask about linking your accounts so you can transfer money into or out of their account and have visibility into their spending habits. Don’t worry, you can set it up so you can see into their account, but they can’t see into yours.
- Sign up for direct deposit. If their employer offers it, have them sign up, with some of their money going directly into a savings account where they’re less likely to spend it. Many experts recommend starting with 10% of their income going into savings. After all, when else will they have their basic food, clothing and shelter needs covered by someone else?
- Use a budget app. Their world is on their phone, so why not make budgeting a part of your teen’s daily screen routine? There are a ton of free apps out there. Just make sure they enter every expense every day so they can quickly see where their money is going. Some banks also feature budget tools that are often free and will automatically track and categorize spending.
- Teach the grown-up stuff. If they earn enough, Uncle Sam will come calling. Make sure they’re aware that their actual paycheck will have taxes withheld. You can estimate how much they’ll bring home and adjust the savings percentages as needed. You might also consider opening a Roth IRA (custodial for minors) if they will have earned income from a job. Even if they only contribute a little each month, they’ll learn about compound interest and can add more as their income increases throughout the years. Look for institutions with low-cost, low-minimum-to-open options.
About Umpqua Bank
Umpqua Bank is a subsidiary of Columbia Banking System Inc., and a premier regional bank in the Western U.S., operating in Oregon, Washington, California, Idaho, Nevada, Utah, Arizona and Colorado. With over $50 billion of assets, Umpqua combines the resources, sophistication and expertise of a national bank with a commitment to deliver personalized service at scale. The bank consistently ranks as one of America’s Best Banks (ranked by Forbes) and supports consumers and businesses through a full suite of services, including retail and commercial banking; Small Business Administration lending; institutional and corporate banking; equipment leasing; and wealth management. The company is headquartered in Lake Oswego, Oregon, and trades under the ticker symbol COLB on the Nasdaq. Learn more at https://www.umpquabank.com.