The summer is coming to an end and your kids have been working hard at their summer job. Whether they’re working to save for college, to make car payments, or stashing the cash for prom, your children may need some guidance on how to save or invest their earnings. We have some tips to stretch their hard-earned cash while helping them learn a few important lessons along the way.
Set Up a Savings and Checking Account
It may be easier to avoid unnecessary purchases if their savings are out of sight, so move their piggy bank from the bedside table into an actual account. Not only will this give them a way to securely access their money with a debit card or online accounts, they will really be able to see their money grow as they continue to deposit paychecks from their summer job and beyond, helping them understand the concept of earning interest on money they save.
Create a Budget
Does your kid spend their summer job earnings on clothes or meals out with friends? Or does most of their cash go to gas and car insurance? Whatever their expenses are, writing out a monthly budget will help them prepare for what’s coming up so they don’t overspend. Budgeting also teaches kids about “needs” versus “wants,” which helps them learn to make smarter spending choices in the long term as well.
Once they have the budget concept down, learning the importance of credit –how to get it and how to maintain it — should come next in their financial education.
One way to teach kids and teens about investing is to create a system within your home. Have your child put a set amount of their money into a separate account and offer to match a percentage of it every time they make a deposit. Once they get the hang of it, consider opening an investment account and help your children pick companies to invest in.
Your child worked hard, and they deserve to spend some cash! Talk to your child about a purchase they want to make with their earnings, then research the associated costs and consequences of buying it. This teaches them to weigh the worthiness of their purchases and instills a habit of making wise decisions with their money as they get older.
This is also a good opportunity to bring up future finances—your child may be applying to college soon, and you can start to set financial goals for them to reach before moving out. Look at schools they are interested in and calculate an estimate of how much money they’ll need for a full school year.
Whether your kid earns money doing chores around the house or has a real summer job with a paycheck, their first earnings are ideal for teaching them important lessons in money management and financial planning.