According to our Youth Economy Report, kids and teens who are encouraged to save are far more likely to continue saving as adults. Our data shows that British children saved over £12.7 million in 2020, which equates to 12% of their total income.
From your teen's point of view, there are also plenty of reasons to save. Whether they are looking to save up for their first car, a trip away with friends, or a new pair of trainers, getting started is the most crucial step.
Related: Teaching teens about money management
Here's some of our favourite ways how you can help teens save money:
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Open a Junior ISA
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Open a savings account
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Set a savings goal
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Create a budget
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Separate spending and saving money
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Automate savings each week
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Cut back on unnecessary expenses
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Keep track of purchases
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Think twice before buying
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Do chores/tasks to earn pocket money
Read on to see our extensive list of ways for teens to save money,
1) Open a Junior ISA
Parents or guardians with parental responsibility can open a Junior ISA and manage the account. There are 2 types of Junior ISA :
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a cash Junior ISA , for example you will not pay tax on interest on the cash you save.
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a stocks and shares Junior ISA , for example your cash is invested and you will not pay tax on any capital growth or dividends you receive, though be aware funds can go up and down.
Your teens can take control of the account when they are 16 but can only withdraw the money once they turn 18, at which point they can turn it into an adult ISA so this is a great way to teach them about long-term savings, investing and finances.
2) Open a savings account
A parent, guardian, or grandparent can also open a savings account and manage the account on a child's behalf. Your teens can then take control of the account when they are 18 (16 for some accounts and NS&I premium bonds). They can also contribute to the savings at any point, which makes savings accounts a great way to teach kids and teens about long-term savings and different types of savings accounts.
Related:
What is saving and why is it important for kids?, Why your child should have a savings account
3) Set a savings goal
Saving just for the sake of it won't inspire most teens, so get them to set a specific savings goal. This could be saving up for driving lessons or festival tickets, or more general, like saving for a rainy day or life at university. Having a goal in mind will help your teen stay motivated when they save, and having short-term and long-term saving goals to keep them motivated.
4) Create a budget
A budget will help your teen track their income and expenses so they can see how to cut back and save more. Many different budgeting methods are available, but a straightforward way for your teen to budget is to follow the 50-30-20 rule. This means dividing their income/pocket money into three chunks, 50% allocated to essential items, 20% kept back for savings, and 30% to living their life. Other aspects of budgeting include:
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Tracking spend
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Prioritising needs over wants
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Keeping track of their daily and weekly purchases and ATM withdrawals
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Thinking twice before buying items
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Looking at where money is wasted
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Watching how much is spent online
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Having a savings goal
5) Separate savings and spending money
There is, of course, a fine art to saving. Firstly, saving is much harder when your teen doesn't have a goal. To make it easier, help your teen create a specific and measurable goal to separate their spending money from the money they want to save.
Once they have this, it can help to use a savings calculator. This will help your teen determine how long it'll take to save for a specific goal. For example, perhaps they want to save £150 by the end of summer; this means they need to save £18.75 a week.
From their pocket money and other income, they can now work out how much they can spend each week and how much they have to add to their savings pot to reach their goal.
6) Automate savings each week
We are all guilty of opting for instant gratification when faced with a decision whether to splurge or save. And we're all more likely to make a choice that will benefit us in the short term over the long term. The good news is you can help your teen overcome this by taking away the ability to choose; this is where automating savings comes in. If a proportion of your teen's money is automatically put into savings as soon as they get paid, they won't see it as money they can spend.
7) Get them to cut back on unnecessary expenses
Unnecessary expenses are those buys that you don't need to spend money on. They can include eating out, subscriptions, or daily takeaway coffees. Explain to your teens that though these things are enjoyable, they're not essential to their well-being. So if they're trying to save money, it's important to identify and cut back on unnecessary expenses.
Encourage them to understand that just a simple thing like buying one small bottle of cola five times a week quickly adds up: £1.60 x 5 = 8 a week (£32 a month). Or one latte: £3.25 x 5 = £16.26 (£65 a month).
8) Keep track of purchases
Research from the University of St Andrews shows that most of us underestimate our expenditure when it comes to knowing how much we spend – by an average of £75 per week. While this figure will be less for teens, how they learn to manage their money now will influence their future behaviour. For example, if they underestimate their expenditure, they'll get used to dipping into savings to make up for it. So get them used to keeping track of all their purchases daily, not just the big buys, but the small ones too, so they always know how much money they have and don't risk falling into debt.
9) Think twice before buying
Being conscious of how much is spent means helping your teen to think twice before buying. Conversations around needs versus wants and avoiding impulse buys are a start. Remind your teen to start by budgeting (see above) to give themselves a weekly spend. At the same time, they should think about why they spend. Is it peer pressure? Is it boredom? Are they spending because they are subscribed to too many stores and services which send a constant stream of marketing emails and discounts? If so, it's time to unsubscribe!
10) Do chores/tasks to earn pocket money
If your teen needs to top up their savings after pocket money and budgeting, encourage them to earn more by doing extra chores around the house. According to our Youth Economy report, more than seven out of ten kids (71%) now say that making their own money is essential. In 2021, GoHenry kids earned £ 2.9 million from completing tasks set in their GoHenry app. Your teen could tutor younger siblings, do the shopping for you, or even make dinner.
Plus, earning for chores teaches them a more powerful life lesson around money. Says Beth Zemble, VP for Education at GoHenry, "Earning money helps kids to understand both the value of earning and the value of money by helping them appreciate the connection between their labour and the financial gain."
Related: Should I give my kids pocket money for doing chores?
11) Get a part-time job
Nothing will improve your teen's income and savings faster than getting a summer or part-time job. The findings from our latest Youth Economy report indicate that teens are already taking an entrepreneurial approach to earning. Aside from classic teenage jobs, suggest your teen think outside the box for ideas on how to make money in the summer as a teen. From selling on online marketplaces - a quarter of kids and teens (25%) are now earning from selling things on Etsy, eBay, Depop and Vinted to tutoring, looking after animals and more.
12) Try cash stuffing
Cash stuffing is another budgeting method where you withdraw cash from your bank account at the beginning of each month and then put it into envelopes labelled with different categories, such as savings, going out and toiletries. When you need to make a purchase, you take the cash out of the appropriate envelope. This method can help your teen stay on track with a budget and avoid overspending, BUT only if they won't be tempted by all the cash they have lying around and then don’t lose the money. If they are then you are better separating the cash using an online method like an app.
13) Unsubscribe from alerts and offers
Simple things like not saving card details onto the browser so your teen has to enter their card manually each time, unsubscribing from favourite shops, and email alerts can stop your teen spending and help them find more money to save.
14) Use a round-up app
Round-up apps are worth using as they work by rounding up anything you spend to the nearest pound and then saving the difference. For example, if you pay £2.60, these apps will charge your account £3 and put that 40p difference into another account or a separate savings pot.
15) Use student cards for savings and discounts
If your teen is over 16 and is a full-time student in further education, they are entitled to student discount cards such as the ISIC and Totum. This includes Sixth Forms and Colleges. The sign-up process is very easy once they have an academic email, and cards will give them a fantastic array of discounts from 15 to 25% across a range of shops, restaurants and services.
16) Show teens the benefits of saving money
Talk to your teen about the benefits of saving money by sharing real-life examples, such as how saving helped you achieve a financial goal or how it helped you through a difficult time. At the same time, discuss the long-term benefits of saving money, such as being able to afford a down payment on a car, paying for university without loans, or being able to go on holiday.
It also pays to show them the power of compound interest: Explain how compound interest works and the potential long-term benefits of saving early. By consistently reinforcing the benefits of saving money like this, your teen will be more likely to see the value in why they should save money.
17) Set a good example
Setting a good example for your teen means being a good money manager. Show your teen how you have different saving goals for items like bills and holidays and longer-term investments like ISAs and pensions. The more you talk honestly and openly about money and how you save with your teen, the more they will understand the importance of financial planning and saving.
18) Get a GoHenry prepaid debit card
A GoHenry teen debit card gives your teen access to a broad range of financial education tools with the in-app Money Missions. Here teens can watch videos and learn about saving, compound interest, spending, and more. This means when the time comes for teens to go off to university and get access to their student loan or Junior ISA funds, they will have the money skills they need to manage their money and savings wisely.
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