Developing smart financial habits is not second nature. It takes time and practice to reach financial security, and the sooner you start, the better.
For most teens, the stakes are lower — you aren’t losing a home or ruining your credit score. This allows young adults the space to learn how to manage their finances with less to lose.
Practicing smart money decisions as a teenager can boost your chances of becoming a financially literate adult, and set you up for success as you start making your own money or looking toward leaving home.
Financial Goals for Teens
“Young people are strongly focused on the present and need help keeping the future in sight. They are experimenting with thinking and deciding for themselves, therefore they require the space for doing that in a risk-controlled environment,” says Mariana Martinez, senior family dynamics specialist with Wells Fargo Advice and Planning.
For younger individuals learning how to manage money, goals might not be as clear as saving for a home or planning for retirement. Instead, focus on these five financial goals that help to establish baseline habits for future success.
1. Identify Your Personal Financial Priorities
Each individual has different financial priorities and goals, which are closely tied to their personal values. As you start learning to manage your money, it’s important to understand what those are in your circumstances.
Bobbi Rebell is a certified financial planner, founder of Financial Wellness Strategies and author of “Launching Financial Grownups: Live Your Richest Life by Helping Your (Almost) Adult Kids Be Everyday Money Smart.”
She says, “The most important goal for teens, and the best way to gain financial independence at a young age, is to identify their values and priorities, and to use that as a base to establish good financial habits.”
For some, Rebell says, the goal might be to save for a specific purchase, have a career that offers them financial freedom or earn scholarship money to attend their dream college.
“It doesn’t matter what the goals are — what matters is that they identify their financial values and priorities,” she adds.
Once you understand your particular financial priorities, you can start to make a plan to achieve your goals.
[Related:Homeownership Not a Priority Yet? These Financial Issues Should Be]
2. Start Earning Your Own Money
While not all teenagers might be in a position to start a part-time job, finding small ways to earn money that is just yours — whether it be employment, allowance or odd jobs for friends and family — can help with understanding the value of your money.
“Have the satisfaction of earning your own dollars,” Martinez says. “Use your own money to pay for important items. Experience the empowerment of financial independence.”
3. Learn to Follow a Budget
A good budget is a fundamental tool for any financial toolkit, so building one as a teen can help you learn the basics before more income and expenses come into play. This can be as simple as learning to shop around for cheaper items on your grocery run.
[Read: How to Make a Budget — and Stick to It.]
“Learn to shop comparatively and within a budget. Savor knowing that you got your dollars’ worth and that you will not be surprised by extras (taxes, hidden costs, unexpected fees, etc.),” Martinez says.
4. Curate Financial Tools that Work for Your Needs
Setting up checking and savings accounts are important for teens, but those are just the beginning of the financial tools most will need for financial security. For instance, being added as an authorized user on a credit card can help you start building your credit history at an early age.
Now is also the time to check out budgeting apps and other tools to see what works best for you. The more you use these resources now, the easier it will be to navigate trickier programs as your financial life becomes more complicated.
5. Start Long-Term Savings
Besides a budget, emergency savings is probably the second most important financial tool to have at your disposal as an adult. Savings accounts also help you plan for long-term financial goals ranging from large purchases to homeownership to retirement.
It’s clear that getting used to setting aside money for savings is important to learn — not to mention the earlier you start saving, the more you can earn in interest over time.
“Begin to envision long-term savings (not necessarily with a clear goal in mind) and learn about the power of time in growing money. Understand concepts such as interest and dividends,” Martinez says.
[READ: How Much Should You Save In an Emergency Fund?]
How Parents Can Prepare Their Teens for Financial Success
Parents and guardians can support their teens on their financial journey in a variety of ways, from sharing the best money books for kids to being transparent about their own financial situations.
“Parents are often tempted to ‘protect’ their kids from anxiety by avoiding sharing their past financial difficulties, and that can make sense at times. But if the kids are mature enough, and especially if the situation is in the past, letting the next generation know that things were not always perfect for their parents can really enhance the parent/child bond,” Rebell says.
Martinez adds that while many parents might not think these types of conversations are age appropriate, they provide real-world exposure to money lessons that teens can learn from.
“[Openly talking] about money goals and plans in the family represent invaluable lessons,” Martinez says.
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5 Important Financial Goals for Teens originally appeared on usnews.com
Update 09/09/24: This story was published at an earlier date and has been updated with new information.
