Are you worried about how much money your teen spends or their inability to save? If so, you're not alone. Here's what you need to know to help teach your teen money management and the value of money.
The importance of teaching teenagers about the value of money
The Big Young People’s Survey by Young Minds found that 72% of teens said they are ‘often’ or ‘always’ worry about finances. The good news is that teens say they want to learn more, with eight in ten saying they're more than open to financial education.
Our own research, conducted in partnership with Censuswide and Development Economics, also shows that teaching teens about the value of money and finances is hugely beneficial to their future success. Findings show 77% of adults earning £55,001-£65,000 per year received financial education as a child. Of those who received financial education, they are saving, on average, 44% more into their pension pots each month compared to those who did not benefit from financial education.
How does financial education help teach your teens the value of money?
Financial education can teach your teens the value of money in several ways:
It can help them to understand the basics of personal finance, such as budgeting and saving.
It can help them to develop good financial habits, such as delayed gratification and resisting impulse purchases.
It can help them to make informed financial decisions, such as choosing the right bank account, savings account and a pension plan.
Louise Hill, COO and Co-founder of GoHenry agrees: "At GoHenry, we want to help make every kid and teen smart with money, so they understand delaying gratification and money management basics around spending, saving and investing. Research shows that children who receive this kind of financial education are £70,000 richer in retirement and much less likely to be unemployed or in low-income jobs as adults."
How to teach teenagers about the value of money
- Encourage them to get a part-time job
- Explain how earning relates to spending
- Set goals around savings
- Make them pay for their own items
- Be a good role model
- Have honest and open conversations about money
- Let them make financial decisions and weigh up the pros and cons
- Involve them in financial decisions
- Talk about money-saving tactics
- Encourage long-term saving
1. Encourage them to get a part-time job
Teens can learn a lot about the value of money from getting a part-time job. Research from the Money and Pensions Service shows that over two in three teens who receive a regular, fixed amount are aware of their financial incomings and outgoings and are better with money.
Alongside this, a job teaches teens about commitment (they won't get paid if they don't go in), the value of their time (how much is their hard work worth to others?) and that what you are paid isn't what you take home (national insurance and taxes are deducted).
If part-time jobs are hard to find, consider other ways for your teen to make money, such as adding tasks and chores for weekly pocket money. This will teach them the value of earning and how hard you have to work to get paid.
2. Explain how earning relates to spending
Associating their time and effort with pay is a key lesson for teens in understanding the value of money. Nothing will bring the message home faster than showing teens how their earnings translate into buying things in the real world. For example, if they earn £10 an hour, point out that:
A Deliveroo pizza for two isn't £25; it's 2.5 hours of their time.
A pair of trainers isn't £110; it's 11 hours of their time.
A new phone isn't £400; it's 40 hours of their time.
If they were paying £600/month for a flatshare, that's 60 hours of their life every month (7.5 days of work each month).
3. Set goals around savings
A 2020 study by the National Foundation for Educational Research (NFER) found that UK teens are more likely to spend money on clothes, food, and entertainment than they are to save money. However, the study also found that teens are more likely to save money if they have a specific goal, such as saving for a car or a holiday. So when your teens mention driving lessons, days out, or high-ticket items, suggest ways for teens to save and show them how to automate their savings.
4. Make them pay for their own items
Nothing brings home the value of money faster than paying for your expenses. Making teens buy or pay for their own items like headphones, phone bills and or Spotify teaches teenagers the importance of budgeting their money. It shows them that money is a limited resource, so they must plan and think about their needs versus wants.
5. Be a good role model
Teens learn by watching the adults in their lives. If you want your kids to be good with money, you need to be good with money yourself. Don't let them see you making impulse buys on credit, buying things you never use or wasting cash. Instead, talk to them about prices, and whether items are worth the money, so they get used to questioning what they spend their money on.
6. Have honest and open conversations about money
At a certain point, your teens can handle the realities of the household budget. Let them know how much money is spent simply running the house and show them the cost of the mortgage/rent, water, council tax, energy, broadband, bills and food bills. It can be an eye-watering experience for teens to see how much of your money must be allocated to needs before thinking about everyone else's wants.
7. Let them make financial decisions and weigh up the pros and cons
One of the best ways to teach teens about the value of money is to give them space to make their own financial decisions with their money. Beth Zemble. VP for Education at GoHenry agrees. "To encourage spending wisely, allow teens to spend their own money on items they want. If your teens want the latest fashion trend or video game, prompt them to use their own savings or income. Often, they'll decide to forgo the item if they have to pay for it."
Moreover, making their own financial decisions will also help them learn from their mistakes (for instance, overspending on clothes so they can't afford to go out with friends), which will help build confidence so they can make more significant financial decisions when they start working or go off to university.
8. Involve them in financial decisions
It also helps to involve teenagers in financial decisions in the home, around spending and saving so they can see money is a limited resource. For example, does your family need all the subscription services you have? How can you cut back on everyday items to save more for holidays? Where do they think money is wasted in the house?
9. Talk about money-saving tactics
Showing your teens a range of money-saving tactics like thinking before you buy, using comparison sites, and utilising vouchers and discounts will show them how to get more value for money. This is helpful for teens because when they realise that money doesn't go as far as they want but see that they can save money by shopping smartly, they learn the importance of delayed gratification and financial responsibility.
10. Encourage long-term saving
Talk to your teens about long-term saving, which can help them understand the value of money over time. Explain compound interest so they see how their money can grow and how important it is to make smart financial decisions. This helps them understand that money is a tool that can help them achieve their goals and live the life they want.
How can GoHenry help?
GoHenry is a prepaid teen debit card that can help teens in several ways. Not only does it give teens the independence to use a debit card in the real world, but it also helps them learn about the value of money and how to make smart financial decisions. It teaches them about money management and the importance of tracking their spending, and also allows them to set savings goals.