Save for your teen’s financial future – together

If your teen has started to think about their future, and they’re ready for some real financial responsibility, here’s a project you can work on together.

This will require that they have some income of their own, and you’re able to contribute to their savings on a regular basis.

Pick a goal

Work with your teen to find a long-term financial goal you can save toward together. Ideally, this could be saving for retirement — but if that’s too far away, talk about saving for college, or a fancy car or even buying their first home.

The object or goal they’re saving toward isn’t extremely important as long as it’s something they are excited to save for and something you will also want to contribute to over the long haul. When in doubt, consider giving them the final say. After all, this is about empowering them, and the ultimate success of this project will depend on their motivation more than yours.

Start saving

Together, open a separate savings account for this purchase, and — here’s the fun part — incentivize them to save for it by agreeing to match what they save, or a percentage of what they save, up to a certain amount.

That’s right — you are providing the employer match in this scenario, so make sure to set terms that you can stick to. First, determine the maximum amount you could contribute in any given month, and cap your match there. Then, figure out what percentage of their savings you’d like to match. Your teen will get the most bang for their buck if you match them dollar for dollar, but some might actually be incentivized to save more if they have to push to get the maximum match. Work with them to figure out what’s right for you and them — it’s all about striking that sweet spot between motivation and realistic expectations.

Let’s say your monthly budget allows you to match your teen’s savings up to $200 monthly. Here are a few examples of what this could look like.

Keep it simple, and don’t overextend yourself. Even if you feel as though you can’t contribute much, your teen will appreciate that you’re willing to work toward this goal with them.

Oh, and don’t forget to agree on a reasonable end date. In an ideal world, the project would end when the goal is achieved. But if that’s not realistic, think about stopping when they graduate college or turn a certain age. After all, you don’t want to be on the hook for matching a percentage of their monthly contribution when they finally get a “real” job.

You can do it

This is a long-term endeavor that inevitably requires patience from both of you, but this kind of activity can have many benefits. Not only will it mimic a potential future employer match in a retirement savings plan, it will expose your teen to investing without much risk, and it provides a tangible way for you both to contribute to their future — by setting them up with a small nest egg and financial literacy in the process.

This is the third part in a series of articles on talking to your children about finances. For tips on introducing younger children to financial concepts, click here. For info about introducing young teens to money, click here.