Graduation season is upon us, bringing many key moments for teens — whether that’s starting high school or preparing for life after graduation. Each milestone comes with new independence and financial responsibilities, making it the perfect time to help your teen save for life’s big purchases and build smart money habits.
Saving is tough at any age — it requires planning, restraint, and repeatedly distinguishing between needs and wants. Adults have experience asking themselves: Do I really need that $10 latte? Do I need to subscribe to both Hulu and Netflix? Teens, however, may need guidance learning how to plan, budget, and prioritize purchases in order to reach meaningful goals.
What Is a “Big Purchase” For a Teen?
For adults, a big purchase is anything that their normal monthly income won’t cover. That might be a new $600 couch or a $6,000 bathroom upgrade. For younger teens, a big purchase might be a pair of Nike sneakers, a new bike, or concert tickets. As teens grow older, their needs change and savings may go toward larger purchases like a laptop for school, living expenses for a dorm or apartment, or their first car.
Whatever big purchase your teen is working toward, saving for something substantial can be an impactful and confidence-building experience for them.
Tips and Tricks for Budgeting and Saving
Understand the “true cost” of wants and needs. Money is time, and it takes labor in some form or fashion to make it. Those new AirPods aren’t just $300. They’re worth 30 hours at a summer job making $10 an hour or six weeks’ allowance or half a summer of babysitting. Reframing purchases in this way helps teens put the amount of work required to afford something into perspective.
Give every dollar a purpose. Whether your teen receives an allowance or has a summer job, every dollar they earn should be categorized or have a “job.” Each dollar should go into a category, like a car fund, fun money, savings, and so on. These simple systems can serve as a bridge to more formal tools offered by banks, such as digital savings trackers or goal-setting features, helping teens see progress in real time.
Introduce a simple budgeting framework. Share the 50/30/20 rule with your teen. The premise is that 50% of your income goes toward needs, 30% goes toward wants, and 20% gets put into savings. This might be too advanced for a teen who doesn’t have many “needs,” so you might find it useful to split this rule into 60% for spending and 40% for saving. Spending could include eating out with friends, clothes, and/or video games. The other 40% goes toward savings, and those savings can be broken down even further into categories such as college tuition, a down payment on a new car, or rent for their first apartment.
Saving for the Future, Today
Today’s teens have the unique experience of growing up with digital budgeting tools that help track goals in real time. They can even categorize savings and expenditures and automate progress toward major purchases. This can really help turn saving into a habit rather than last-minute, impulsive decisions.
Many banks also offer savings calculators that can help determine how much to save each week or month toward a future goal. Participating in savings trends, like Frugal February or No-Spend July, or adopting a revenge-saving mentality are also ways teens can dramatically increase savings, either during specific months of the year or in general. Encourage your teen to follow financial education creators on social media so they can stay up to date on the latest savings trends and challenges.
Teaching your teen to save for that big purchase — whether it’s a car, their own education, or that trip to Europe they want to take after graduation — helps instill a savings-based mindset that is crucial in today’s economy. It goes beyond short-term goals, laying the foundation for healthy financial habits that will serve them for life. The future will bring new responsibilities, like managing their own finances, balancing conflicting needs and wants, purchasing a new home, and saving for retirement. The lessons your kids learn now will impact them far into the future in a positive, fruitful way.
