- As children get older, they gain more financial independence
- Getting good advice now can last a lifetime
- We look at the world of work and explore young people’s saving options
Last month, we shared our advice on introducing young children to good money habits.
So, this month, we’re following it up with some tips on how to introduce some financial life skills to teenagers.
As we get older we start earning our own money and get an element of financial independence from our parents or carers.
As responsible adults, arming your teenager with the right knowledge and attitude towards money can help set them on the road to a responsible and prosperous adulthood.
Understanding your first payslip
Entering the world of work is a big moment in anyone’s life.
At the end of your first month, your first wage goes into your bank and your employer will give you a payslip, which can look a little confusing at first.
Here’s a quick breakdown of the important information on your payslip:
If your teenager is earning money of their own, then the temptation might be to spend, spend, spend!
It’s their money, and they should be able to enjoy it, but it’s also worth encouraging them to get into some good habits, like saving and budgeting.
Saving and spending
Saving money ‘for a rainy day’ isn’t always a big incentive, so it’s an idea to speak to your teen about their financial goals, which might be those new trainers they’ve seen, buying a car or even going to university.
Setting goals, following your progress and then finally achieving them can be really rewarding. It’s a lesson in life, that by resisting temptation and only spending what you can afford, you can ultimately do much more with your money.
Perhaps you could show your teen how to choose a savings account, then set up a standing order so they put aside a certain amount of their pay every month to help them achieve their savings goals.
Many accounts come with smartphone apps, so they can check on their savings any time, which gives them the satisfaction of watching their money grow and motivates them to keep going.
Choosing a savings account is also a great opportunity to introduce concepts like interest and investing.
Taking an interest
Most banks and building societies offer standard youth accounts, which can typically be opened by young people aged 11 years old or over, though often an adult also must be there when the account is opened.
They’re a lot like adult current accounts, but you can’t go overdrawn, so you can’t spend money you don’t have, and they don’t usually have any fees or charges.
Many of these accounts do pay interest, but many providers also offer savings accounts where the rewards can be a little higher.
Watching savings earn interest can be really motivating for young savers; the more they save, the more interest they earn and the faster their savings grow.
To get the best rate of interest, they might have to commit to paying in a certain amount every month, which can be a good incentive to keep saving too.
It’s worth shopping around to find the best rate, and online comparison sites can be a great way of doing this.
But these sites tend to just cover the main national savings providers, it’s also worth looking at smaller building societies operating in your area to see if they offer a better rate of interest.
If your teen has longer-term savings goals, you can help them explore fixed-rate savings accounts, sometimes called bonds, which mean you can’t withdraw any money for a certain amount of time, usually between one and five years.
Junior ISAs are another option, but as the money is locked away until they are 18 and your teen is unlikely to pay tax on their savings anyway, it’s more likely that getting the best rate of interest will be more important to them.
With a commitment to put aside modest but regular sums of money and a savings product that offers good returns, a teenager can quickly get into good habits that should stick with them for many years to come.
The next chapter
In the next chapter of their life, as your teen becomes a young adult, they will have even more opportunities to make the most of their cash when they can start investing.
These can bring great opportunity, but also an element of risk.
That’s a whole new topic, and it’s one we’ll explore in our next blog for parents and carers.