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Teenagers and saving

Talking with your child about money can go smoother if you keep the conversation age appropriate. The conversation starters and activities here can help you find the words.

Conversations about saving

“A good rule of thumb is to save 10 percent of what you earn, and have at least three months’ worth of living expenses saved up in case of an emergency.”

  • Once your teen has a steady job, help him set up a savings program so that at least 10 percent of earnings goes directly into his savings account.
  • Help your teen track what he actually spends in a month. Talk about how to estimate three months’ worth of expenses, and how much to save from each paycheck to build up his savings.
  • Talk about how to keep money in a safe place, like a federally insured bank or credit union.
  • Explain that, if possible, it’s better to have more savings—like six to nine months’ worth of living expenses, instead of only three. 
  • Discuss how much your child can save. What will she gain? What will she have to give up? Is it worth it?
  • Explain to your child that once she starts a job, she may be offered an account at work called a 401(k). Some employers provide matching contributions as an incentive to save, so it’s smart to save at least enough for the maximum matching contribution.

Activities about saving

“The sooner you start saving, the faster your money can grow from compound interest.”

  • Compound interest is when your child earns interest on both the money she saves and the interest she earns. Show your child the following: If she sets aside $100 every year starting at age 14, she’d have about $23,000 at age 65. However, if she begins saving at age 35, she’d have about $7,000 at age 65. The example assumes the account earns 5 percent every year.
  • Experiment with your child to show the effect of saving different amounts at different interest rates. Try out the SEC’s compound interest calculator .