Iman Humphrey, 17, a student at Dubai College, says it is increasingly difficult to control impulse buying and save money as a teenager because sales and online shopping result in pointless spending.
“Although saving money may be seen as difficult, there are simple rules that I follow that help me save that extra bit of money for summer,” the British-Singaporean teen says.
“I have been in the habit of constructing a savings plan, which is a useful way to distinguish between wants and needs and assists me in allocating a specific proportion of my money to my savings and my spending.”
Early financial education can help to foster strong money management skills in adulthood, experts say. But personal finance education is rarely on the curriculum at schools and universities, with youth often relying on their parents to teach them important lessons about managing money.
About 54 per cent of teenagers say they are worried about financing their futures, according to a February survey by non-profit youth organisation Junior Achievement USA and Citizens Bank, which polled 1,000 children between 13 and 18 years old.
Forty-one per cent of students said they didn’t have any financial literacy classes in high school, the survey found.
“Summer holidays are typically associated with travel and splurging on experiences and indulgences that teens usually don’t have time for during their hectic school term. Given that money management isn’t for the most part taught in the current education system, it might be a good idea for parents to use this as an opportunity to educate teens on this matter,” says Marilyn Pinto, founder of KFI (Kids Finance Initiative Global).
“Most of us aren’t trained in financial education ourselves, we really don’t have the time or the bandwidth to teach our teens about money. None of that, however, absolves us of this responsibility of teaching our teens about money."
Ms Humphrey sets aside money at the beginning of the month and spends only the remainder, which prevents her from overspending. She also tries to avoid impulse shopping.
“I make a list of what to spend, this helps me visualise what am I spending money on and reflect on whether I may or may not regret any purchases to prevent this from happening again in the future,” she says.
We spoke to personal finance experts about how teenagers can save for a summer holiday.
1. Start early and plan ahead
Saving up for any kind of goal becomes easier when the amounts are smaller and there is enough time before your savings goal needs to be met, says Smeetha Ghosh, co-founder and chief executive of Cashee, a digital banking platform for teenagers in the Mena region.
“In other words, try to avoid depriving yourself of everything for one to two months,” she says.
To break down the goal amount further, divide the money you need to set aside each month by the number of months to meet the goal, Ms Ghosh says.
2. Create a summer holiday budget
The act of creating a simple budget allows teenagers to appreciate how much they need for their summer holiday versus how much they have now, says Will Rainey, founder of Blue Tree Savings, a company that helps parents teach their children about money and the author of Grandpa’s Fortune Fables.
The budget will help them fill in the gap because they have a clear understanding of how much they need to save each week before their summer holiday. They can then track how they are progressing, he says.
“The more carefully you scrutinise what you spend on, the easier it becomes to start identifying leaks in your money management style,” Ms Ghosh says.
“Do you really need that Starbucks latte or that Nitro on Discord? Start questioning needs vs wants. Also, tracking your earnings and spends [via a banking app, a notebook or spreadsheet] can be an eye-opening experience for a novice saver,” she says.
3. Encourage them to find opportunities to earn
While it is not recommended linking chores to allowances, parents can pay teenagers for extra work they do around the house, over and above their designated chores, Ms Pinto says.
“Help them use their special skills and talents to funnel this income. This has the dual advantage of getting them to link effort to money, while also making them extra-mindful of spending that hard-earned money,” she says.
Earning money is the quickest way to save more money, Mr Rainey says.
Teenagers can earn money in different ways. This could be offering to do jobs around the house for their parents, completing online surveys, online tutoring or babysitting, Mr Rainey says. The key is to make sure they save these earnings rather than just spend more, he says.
“The key is figuring out what teens can offer that someone would be willing to pay for, mixed with some early entrepreneurial skills, to potentially land you a short or even long-term side gig,” Ms Ghosh says.
Tutoring, baking, dog-walking/pet-sitting, baby-sitting, admin and paperwork are some skills that teens can monetise, she says.
“If you’re into tech or a gamer, help moderate some Discord servers, create basic websites for start-ups, or even social media content. A lot of tech start-ups look for easy [and affordable] ways to meet their early marketing needs. Find your niche,” Ms Ghosh says.
4. Separate money into a ‘summer holiday’ bucket
The simple tactic of putting money into a specific bucket materially reduces the chances of teenagers spending this money on other things, according to Mr Rainey.
“This could be written on a piece of paper or put into a separate savings account. This also helps them to monitor how much they have put aside for their holiday vs how much they think they need,” he says.
“When money is not earmarked for certain things, then we are constantly asking ourselves ‘Should I buy this now or keep for that later?’ and usually the desire to spend now wins,” he says.
5. De-clutter with a garage sale
People accumulate a lot of material possessions living in the UAE, Ms Ghosh says.
Teenagers can take stock of all the things they own and sell them if they no longer spark any joy, she says.
“You not only get rid of old stuff, but can also earn some extra money doing so,” she says.
6. Automatically save when you get some money
Teenagers need to get into the habit of saving money before they start spending, according to Mr Rainey.
Therefore, as soon as they receive any money (pocket money or money earned), they should save a set amount and not touch this money, he says.
“Most people don’t save because they say ‘I’ll save whatever I don’t spend’ and then end up spending it all,” he says.
7. Practise delayed gratification and impulse control
These two concepts are essential for teenagers to master if they are to be fiscally responsible and start saving towards a goal, Ms Pinto says.
“Training teens to resist temptation and hold out for a better reward in the future is a skill worth cultivating and not just for better finances,” she says.
“This skill of delaying gratification has shown to directly correlate with better academic performance, higher paying jobs, better health, and more successful relationships.”
It is equally important to cultivate impulse control, she says. Understanding what impulse buying is, why teenagers are so susceptible to it and how to control it is another key issue parents need to talk to them about.
“Given the constant barrage of advertisements specifically targeting teenagers, online and off-line, peer pressure and the predatory marketing tactics used by companies, we have our work cut out for us. But the earlier we start, the easier it will be and the higher dividends it will pay in the long run,” Ms Pinto says.
8. Research discounts before spending
Teenagers should get into the habit of checking to see if there are discounts before spending their money, Mr Rainey says.
This has two benefits in terms of saving money. One, if there is a discount, then they save money (although the savings should be put away in a “summer holiday bucket” rather than spent elsewhere), he says.
Two, the process of searching for a discount slows down the transaction process and can avoid impulse spending, he says.
9. Take out a loan from parents
How about asking parents for a loan and proposing an interest rate (or an achievement instead) and a period when this loan will be paid out? says Ms Ghosh.
“It’s not the best savings strategy out there, but it does teach the concept of credit — the good and the bad of it,” she says.