Financial Planning for Teens: A Short Guide
It’s never too early to learn the value of money. Good habits created now can lead to a lifetime of better decisions.
Many parents would like to know how to set their teens on the path to financial security. As well as giving your child the best start in life, financial discipline also has the following benefits:
We have prepared this guide to help you start some initial financial conversations with your teenager.
Set Some Goals
No teenager is even considering retirement, but perhaps there are some new trainers or a games console they would like. Encourage your child to think about small, attainable goals, and to write them down (or make a note on their phone). For every goal, include:
Once the goal is tangible, your teen can then work out how much they need to set aside each week. Early, smaller goals may be achievable from pocket money, but as your child starts to think about it, they may become more ambitious.
This can be a good time to learn about part-time jobs (or, if they are too young, earning money by helping at home) and selling unwanted items (using a parent/guardian’s account and oversight where platform age limits apply, e.g., Vinted).
They will have bought their first car before you know it.
Learn to Budget
Understanding that money is a finite resource is a valuable life lesson. It often comes too late, with a mountain of debt and a monthly countdown until payday.
Most teens don’t have essential bills to pay, which makes budgeting much easier. But maybe they have club memberships or online subscriptions that are paid monthly, and need to be planned for. Teaching your child to keep an eye on their incomings and outgoings will help them in the long run.
Around age 7, many banks offer savings accounts for children. Bank debit cards are generally available from age 11, while prepaid kids’ cards can start from about age 6 (with parental controls).
As well as improving their budgeting capability, letting your child have a debit card can stop weekend shopping arguments from escalating.
‘Do you have your debit card and do you have enough money in your account?’ is the only answer you need to yet another request for the latest video game, phone or shoes.
Good Savings Habits
Once your teen has learned to set aside some money every week and to balance their budget, they can start to think about regular savings.
Not only for a specific item they have decided that they want and can achieve relatively quickly, but also for some unknown future expenditure.
Saving money while young helps to build the skill of delayed gratification. This is the key to success in any area – exams, fitness, sporting achievements and career development. Put in the work now, reap the rewards later.
Help your child find a suitable savings account and encourage them to check their balance online.
You may even agree to match their contributions if they decide to make regular savings, providing they agree not to touch the money for a set period.
Talk to your child about what they can achieve with their savings - a first car, a deposit on a flat, a debt-free start to university life.
As they get older, they can translate these thought processes to bigger goals - a house, a family, a boat.
Investment Options
You can also educate your child about the basics of the stock market such as how investments can make money but it can also be lost. Look at some share charts and discuss how assets behave in different market conditions.
Play around with some online investment calculators. How much would your teen need to invest each month to become a millionaire by the time they retire?
Teach them about investment concepts such as compounding interest and reinvesting dividends, while warning them to remain mindful of inflation.
You may not yet feel confident about giving your teen a sum of money to invest, but perhaps you could set up a Junior ISA and allow them to have a say in the fund choice.
JISA funds belong to the child; they can take control at 16 but cannot withdraw until 18. The combined annual JISA limit is £9,000.
Ask your school about current investment clubs or virtual investment challenges, or create a family practice portfolio to learn together.
Making a game of it can help teenagers become more confident about investing without taking needless high risks. Money is fascinating when it is not tied up with negative emotions such as guilt or deprivation.
Career Planning
Set your teen on the path towards lifestyle planning by encouraging them to think about what kind of career they would like.
Schools and career services focus on skills, academic subjects and workplace satisfaction. But does your child have a realistic idea of what their chosen vocation will pay?
£20,000 a year might seem like a fortune to a school leaver, but will it support a home, family and the kind of life they want?
Talk openly about the cost of living and how many hours you need to work to take a family of four to Tenerife. It costs a small fortune to drive a car, and a larger fortune if you drive badly.
While your child may favor contentment and job satisfaction over a vast salary, they should be clear about the lifestyle they will be able to afford.
Top Tips
Finally, a few tips for teaching your child about financial planning:
Please do not hesitate to contact a member of the team to find out more about financial planning for your family.
Please note:
The information in this guide is for general guidance only and does not constitute personal financial advice. Your capital is at risk when investing; investments can go down as well as up, and you may get back less than you invest. Past performance is not a reliable indicator of future results. Tax treatment depends on individual circumstances and may change. Financial plans can be affected by market downturns, inflation, and changes in tax laws, and no outcomes are guaranteed. Readers should seek independent, FCA-authorised financial advice before making any investment or savings decisions.
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Please don’t hesitate to contact a member of the team to find out more about financial planning.