Hey there! It's Talk About Money Tuesday, my favorite day of the week!🤑

In early summer, I opened a high-yield savings account to sock away some cash I'll need in about a year. It made me think about how some money needs a parking spot (savings) and some money needs a job (investing).

To young people, saving and investing can sound like two versions of the same thing. However, they're actually built for different jobs that are easy to explain.

Saving is about keeping money somewhere safe and easy to get to when you need it. Investing means putting money into things that could grow over time, but their value can go up and down along the way.

Knowing the difference is a key piece of foundational literacy. A teenager who learns how to save for a new laptop and invest for a goal that's decades away is learning how to match a money decision to a time horizon.

Parents and mentors, you can play a big role here. Young people are surrounded by messages about stocks, crypto, trading, and "making your money work for you." Before they start chasing returns, they need to understand when money needs to stay safe and when it needs to grow.

Because it's not just about where they put their money; it's about when they'll need it.

Money Stat

$400

An unexpected expense in that amount would push 37% of adults to either borrow money or sell something to pay for it, or they simply wouldn't be able to cover the cost, according to data from the Federal Reserve.

That makes $400 a useful reality check: Before worrying about maximizing investment returns, it's important to have enough accessible savings to handle a relatively small financial surprise without it turning into debt.

Get in the Zone

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Money skill: How to match money to your goals

Why it matters: When young people understand that financial decisions should follow their goals, it can turn saving and investing from abstract financial concepts into decisions that they can practice with their own money.

Try this: Give your child a hypothetical $500 and three goals with different timelines (Monopoly money works great if you have it.) For example, they might need $100 for something happening in the next few months, $150 for a goal two or three years away, and $250 for something they won't need for 10 years.

Ask them to decide where each amount should go — into savings or into an investment account. Try to resist the urge to give them the "right" answer right away. Instead ask questions that would get them thinking about risk and timing, like "What would you do if you need $100 next month and your investment was only worth $80?" and "Would you be comfortable waiting for it to recover?"

The goal is to help them see that where money belongs depends on when they'll need it and how much risk they can afford to take.

​Download this freebie for youth-friendly definitions of investing terms to share with kids and teens! ​​

Money Talks

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Here's a conversation starter to help young people understand what's at stake when they decide to start investing:

Ask your teen, "When you put money into an investment account, what do you think happens to it?"

This is a good opportunity to explain how an investment account is like a backpack and the investments inside of it can earn money or lose money.

They'll also need to understand what assets they're buying, how much risk they're taking, and how long before they need their money.

Your goal is to help them see investing as a decision, not just another place to park their cash.

Loose Change

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🏈 A sizable amount of Gen Z is using money they set aside for investing to bet on sports.

🌱 Use this compound interest calculator to show young people how money can grow over time.

💼 Although your kids probably understand that you go to work, what you do there is a little bit of a mystery to them.​

Thanks for reading! If you want to read some of my past newsletters, click here. And if this newsletter was forwarded to you, please subscribe ​here​.

'Til next time,

Audrey
​Founder &
Certified Financial Education Instructor​
The FinLit Zone

600 1st Ave, Ste 330 PMB 92768, Seattle, WA 98104-2246
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