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

In a world full of buy now, pay now shopping options, knowing how to save is a superpower. With World Savings Day coming up on Friday, let's get into how you can help young people learn to stash cash and grow the money they set aside. With practice, they'll be well on their way to building financial security and, ultimately, keeping money stress at bay.

Money Stat

.40%

That's the national average interest rate for a traditional savings account, according to latest data released by the Federal Deposit Insurance Corporation. What does that paltry interest rate tell us? Money in a basic savings account is growing much slower than inflation, meaning it loses value over time.

A recent Vanguard survey found that 60% of adults saving for short-term goals — or who plan to — don't fully understand how low interest rates can chip away at their purchasing power. On the upside, many plan to make a change. Two-thirds of survey respondents said they plan to adjust their savings strategy within the next year, with 44% citing inflation as the main reason. High-yield savings accounts, certificates of deposits, and money market accounts (more on all of these later) typically offer stronger returns that help savings keep pace with rising costs.

Get in the Zone

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Money skill: How to make SMART financial goals

Why it matters: It's easy for young people to say, "I want to save more money." But such a vague goal can lead to a disappointing outcome. That's why it's important for them to learn to set financial goals that are SMART: Specific, Measurable, Achievable, Relevant, and Timely. It's a valuable financial skill they can use for a lifetime.

Try this: Ask your kids what they really want to buy or do in the next few months. It could be buying a new phone or going on a day trip to an amusement park with their friends. Help them turn that goal into a SMART goal.

☑️ Specific: What exactly do you want to do? I want to save $250 to buy Apple AirPods Pro 3.

☑️ Measurable: Make sure you can track your progress. I'll use my savings app every payday to track how much I've saved.

☑️ Achievable: You should have the resources to accomplish it. I can save $25 a week from my part-time job

☑️ Relevant: Why is this important to you? I like to have premium audio quality when I listen to music.

☑️ Time-bound: When will you achieve this goal? I'll reach my goal in 10 weeks.

Example goal: I want to save $250 for new AirPods by saving $25 each week from my part-time job for 10 weeks.

Be sure to celebrate milestones, like when they hit the halfway mark, to keep your child motivated. You could also share one of your own SMART goals so they can see that money goals aren't just for kids.

Money Talks

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Speaking of financial goals, they're not all created equal. Helping young people categorize their goals as short-term, mid-term, or long-term gives them an easy way to plan, prioritize, and stay motivated. Here's a way to explain each type of goal to young savers in a way that will resonate with them:

➡️ Short-term goals can be achieved in six months or less. These are often purchases like video games or a new backpack. Short-term goals give you quick wins so you can see that saving works.

➡️ Mid-term goals take a bit longer — think six months to two years. Help your child understand that it requires a bit more patience to save for a new laptop or a semester abroad. Encourage them to remember that slow and steady saving wins the race as they learn to balance spending and saving.

➡️ Long-term goals take several years or more to achieve. Buying a car, saving for college, or building an emergency fund all fit the bill. These goals introduce the concept of earning interest on savings over time and can also spark interesting conversations about delayed gratification, a hallmark of financial maturity.

The Language of Money

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The key to smart saving is to pay yourself first. Instead of spending freely and saving what's left, a teen with a $50 allowance would immediately put some portion of it in a savings account. Automating that transaction is the best way to make sure it happens. Pro tip for parents and mentors: Frame it as paying themselves first, rather than cutting their spending.

Once youth start treating their savings contributions like a non-negotiable "bill" they have to pay, they may want a bigger return on their cash than a traditional savings account (or piggy bank) can offer. Use these easy-to-understand definitions to talk to young people about these popular savings options:

🏦 Money market account: A type of savings account that typically pays a bit more interest than a traditional savings account. Some banks require $1,000 to open an account, which makes it a good choice for savers who have already built up a savings cushion.

🏦 High-yield savings account: It works like a savings account but pays interest that can be at least 10 times more than a traditional account. The highest interest rates typically come from online banks, whose low overhead costs allow them to pay you more. If you're unfamiliar with a bank offering a great rate, use the FDIC's BankFind tool to confirm that your money will be protected if the bank fails.

🏦 Certificate of deposit: Also called a CD, it's a savings account where you promise to leave your money in the bank for a set amount of time in exchange for a guaranteed higher interest rate. CD terms most commonly range from three months to five years. If you take your money out early, you'll have to pay a penalty. So this option works best for money you don't need right away.

Loose Change

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💰 Here's a close-up look at how three teens spend and save their money.

🌊 Plastic piggy banks are washing up on the shores of Texas beaches and no one can figure out exactly why.

🛍️ Learn all about the pitfalls of "spaving," a mashup of the words spending and saving that describes what you're doing when you put more stuff in your cart just to get free shipping. I may or may not be guilty of spaving every now and then. 😉

Thanks for reading! If you know someone who cares about youth financial literacy, share this newsletter with them. And if this newsletter was forwarded to you, please subscribe ​here​.

'Til next time,

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

113 Cherry St #92768, Seattle, WA 98104-2205
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