*This is the third of three articles published in partnership with Old National Bank- Indianapolis. Review the first about teaching young children about the economy, and the second about preparing high schoolers for life after graduation.
In my first role in the financial planning industry, I served as a financial planner for the University of Southern Indiana. During this time, we struck a deal with a local school district that gave us the pleasure to coach and prep young teen and high schoolers with financial know-how before they stepped foot their next chapter- college, work, etc.
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One of my first high school clients was a young woman, 17 years old with $10,000 saved in her bank account. She drove her grandma's old car, lived with her parents and worked at her local Starbucks.
I was so amazed, I asked her how she saved all this money and she told me that she "just worked". As simple as that. What she left out was that somewhere along line she learned the habit of saving. She had a presupposition that all people who worked had the habit of saving!
The case with this student reminded me of my young teen (tween) years, when I wasn’t caught up in the hyper consumer life that left no room for saving or caution against overspending, when I simply had fun with friends, went to school, and saved the money that came my way, through birthday gifts or a part time job.
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The luxury of being a tween or teenager is that they generally don't have many expenses in their budget. With the right habits, your tween can go into college or adulthood with a flourishing and debt free adult life.
I envy those days because if I then knew what I know now, I perhaps would’ve thought twice before jumping on a loan application my very first semester of college. I would’ve had a substantial amount of savings in my account that could cover a decent portion of my first year of college. That would save me a couple thousand dollars of student debt.
Two Things for Your Tweens:
- Start an EMERGENCY FUND. Allocate a good amount of cash (3-6 month worth of your living expenses) in a savings account for emergencies. These might be hard for them to identify now; emergencies could be related to health challenges, job or housing loss, car repairs, or anything unexpected.
Then,
2. Start a SINKING FUND, this is simply a savings goal account your tween can "sink" money into regularly. With this account you and your tween can identify their future expenses and start saving!
The key with these two accounts is to automate them. With this done, you’re not leaving it up to chance to save for their future. And remember: Encourage them to make room for "fun money," so they too can enjoy the fruits of their labor, just like you! Learning the value of both disposable and dedicated funds is critical!
