How to Encourage Investment Habits Among Youths: Top 5 Tips

Posted on June 21, 2021 in Investing

In recent years, there’s been a substantial push in high school to teach students from an early age about the responsibility and multi-faceted nature of finance. It’s critically important to teach young people about the power and nature of money, as well as know how to encourage investment habits among youths from home as a parent. By nurturing the right financial responsibility practices in teens, they will be more likely to maintain a habit of saving and spending their money more efficiently later in life.

There are many ways to teach kids and teens how to save and invest their money, but a hands-on approach usually works out for the best. Here are the five best ways to teach your kids about the importance of money management and how to make consistent and informed management a reality.

5 Tips How To Encourage Your Teenager To Start Saving More

1. Start With the Basics & Instill a Habit of Savings at a Young Age

Children are much more adept to learning tasks and understanding concepts in a deeper manner the younger they’re taught those concepts. For example, language acquisition becomes substantially more difficult once a child passes the age of eight, and it’s no different for good money management and savings habits in children.

You should teach your children how to save and live within a budget when they’re so the knowledge sticks with them and develops in an organic and patient way. When you give your kids an allowance, make they’re keeping track of how much money they’ve been given and how much they’ll have down the road depending on how they spend what they’re given.

2. Provide an Allowance & Create Opportunities to Earn Money

Giving children an allowance is one of the oldest and most traditional concepts in America, and it’s rooted in a rich history know-how and responsibility surrounding the value of the dollar. This is a key way how to encourage investment habit among youths, as children often learn best by doing. Thus, the knowledge is far more likely to stick if they’re given their own money to spend however they like.

Giving your children an allowance will also allow them to spend it on other goods and services and learn how the economy operates on a day to day and year to year basis. Providing an allowance on prepaid debit cards can also help mimic having a credit card. You should also look for other opportunities to give them money in exchange for work, such as chores or doing their homework; this agreement fosters responsibility and will make them more active around the house from day to day.

3. Show them Money Saving apps and foster financial independence

Once your children understand the value inherent in money and know the very basics of receiving and spending the money they earn, you can show them a range of money-saving apps to help encourage saving habits.

You can teach them how to use these apps to track the money they’re taking in and chart where their investments will grow to if they dedicate their time and energy to saving and investing in an intelligent and informed manner. Similarly, you can show them how to get more out of their spending and shopping dollars through cash rewards applications such as Ibotta vs Fetch Rewards.

High school teens are seemingly always strapped for cash, but you can teach your teen exactly where the money is going and why to promote financial independence.

For further ideas about financial apps, see the following comparison: Rocket Money vs Mint: Which is the Better Free Budgeting App?

4. Set Money Goals & Reward Kids for Saving

For kids of all ages, goals should be set and rewards should be doled out if the goals are met. For example, you can create a money saving challenge by setting a goal that fifty percent of all money should be saved during a particular month. If your child or teen meets this goal, you can give them a reward in the form of food or a day out at a special place, like a zoo or amusement park.

You can make these goals as difficult or simple as you see fit and change them up every so often to see how your child responds to a changing environment. Making goals and changing them semi-frequently will teach your kids to be dynamic and adapt to the needs of the present, while keeping an eye toward the future.

4. Set Money Goals & Reward Kids for Saving

5. Model Good Financial Behavior & Teach them about Investing

Lastly, when wondering how to encourage investment habit among youths, you can set an example for your children by taking care of your own money and showing them how and why you spend what you spend. You can take the money you earn from your job and make it transparent to your children before you allocate it to the funds and resources it needs to go into.

For example, you can show your teens or children exactly how much the household is spending on necessities like food, electricity, and gas for the car. Setting this example and being transparent about the money you spend in your own life will help your kids see the real-world implications of good saving and allow them to model spending and saving habits on their own. Once they’re interested, you may even wish to encourage them to learn about what FIRE investing is.

Frequently Asked Questions about how to encourage investment habit among youths

How do you teach a teenager to invest?

There are multiple ways for a teenager to invest their hard-earned money. You can show them the ins and outs of the stock market and teach them the importance of patience in the market, or you can have them place their money in an investment account such as a checking account at a bank.

The stock market is inherently riskier than parking money in a bank, but there’s also far more potential for it to grow and flourish than the tiny interest potentials of a bank. There are also many resources online and in print about teaching teens the value of investing for the short term and long term to build wealth.

How Can I Show My Kids How to Grow Their Money?

Again, there’s no one, set way to grow money for kids and teens. The stock market is a great place to invest in for kids of all ages, as long as the amounts are small and patience is exercised, but banks and other financial institutions make a great place to park money.

Money grows slowly over time, not at all once, and it’s important to stress this message to kids who want to see their money grow while they’re young.

How Can I Encourage Youths to Save up Money?

There are many incentives for investment success that you can set for your children. You can reward them for each dollar they invest or set a target at a specific percentage for them to save. Teaching youths about the growing nature of money and the idea of compounded interest and appreciation will also let their minds run wild with the idea of growing their money as they eat, go to school, and sleep, which is incentive in itself.

You can make the idea of saving sound exciting because of the way money grows on its own, without need of their help or participation in the long term. Another approach could be to provide examples of poor money management, helping kids see the difference between good and bad saving habits. For example, show them how somebody who needed to pursue debt relief is in a much less fun spot compared to someone who has been consistent about paying off their monthly expenses. It’s all about leading them to do the right things, and helping your kids understand why they will be better off and live a more fun and fulfilling life when they are able to build to the right habits from a young age.

What is the Best Investment for a Teenager?

The safest and most traditional investment space for a teenager will be at a bank, either in a checking or savings account. These accounts are safe and secure, and money will only be lost when it’s manually moved out by the owner of the account.

The market is another mostly safe place to put money for a rainy day, though you should stress the importance of patience and letting money grow naturally and over a long period of time, as opposed to treating the stock market like a casino.

Encourage Your Teenager to Invest & Build Money Saving Habits Today

There’s no wrong time to teach your teenager or child about the importance of saving and putting money away for a rainy day. Understanding the best ways how to encourage investment habits among youths is extremely beneficial. You should teach your children about the value of money and saving as soon as you can so the knowledge sticks and develops in their minds through the years.

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