Should Teens Contribute To Saving for Education?

Nicole Spector

Mon, Aug 15, 2022, 6:39 PM 4 min read

Wrangling with student loan debt is one of the most significant economic struggles in the U.S. Americans owe over $1.75 trillion in student loan debt across over 40 million borrowers. Though President Joe Biden has made promises to reduce that debt, it surely won’t be eliminated altogether, and we can expect the problem of mounting student loan debt to continue.

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With this in mind, parents may be wondering, should their kids start working as teenagers to contribute to their college tuition? Experts say the answer is undoubtedly yes — but there are some downsides.

First, let’s look at some of the key pros…

It Forms Good Financial Habits

“As a baseline, teens should absolutely save their money at the earliest chance, which I say not from a financial as much as from a habit form standpoint,” said Dan Fugardi, founder, F22 Growth Advisors and managing partner, VantageBP. “Any habit we give ourselves is just another thing to break later, if it is the wrong habit.”

By learning to earn and save money at a relatively young age, teens can build successful habits that will help them in managing their financial goals throughout their lives.

It Instills a Sense of Responsibility

“Saving for your education and paying for it brings a sense of responsibility from an early age which can instill good values and principles in your life,” said Rasti Nikolic, finance professional at LoanAdvisor. “Teens often do not understand that being independent is a lot more than financial freedom, so taking up some responsibility will help them understand this.”

It’s Not Just About the Savings, but About Learning How To Manage Money

“$1,000 is not going to pay for college,” said James Anderson, founder of SmartMov. “The lesson here is more about spending wisely, always paying yourself first, no matter how small or large and seeing how the interest will add up and work for them. This can be done in conjunction by having the child contribute to other financial vehicles.

“Talking with a child and going through the financial statements will also get them to have more confidence in how to read the documents,” Anderson said. “Learning about things like fees, gains/losses and the power of letting assets remain for long periods of time to grow. This helps to begin to talk about the power of diversification.”

And here’s a look at some of the cons…

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It May Not Be the Best Time/Money Investment

“There is some debate in the college counseling world about whether the job itself (and more importantly the time it takes) is the best net financial investment,” said Rachel Coleman of College Essay Editor. “Colleges give generous merit aid to students with strong GPAs, test scores, and extracurricular activities, on the order of $20,000 to $30,000 per year.”

An Internship Can Be Even More Valuable

“So, if a student had the opportunity to say, participate in a medical research internship versus work a minimum wage job scooping ice cream, I would strongly encourage that student to pursue the internship because it would save them money in the long run if it led to increased merit aid award,” Coleman continued. “Similarly, a job that prevented a student from achieving a strong GPA would likely be a net cost to the student if the job reduced that student’s chance of scholarships. The difference between a $10,000 scholarship and a $20,000 scholarship is immense when you multiply the savings by four years of schooling.”

It Can Take Away From Study Time

Though certified financial planner Thomas J. Henske “can’t see a situation where it doesn’t make sense to let a child take on at least some of the ownership of their college expenses,” he adds that he doesn’t encourage parents to make their child get jobs during the school year. He points out that making kids work in the evenings and on weekends can sometimes sacrifice time that can be better spent studying.

Practice Self-Compassion While Promoting Financial Literacy

Ultimately, parents and their children need to do what is best and most manageable for them. This is important not only from a financial perspective but from a family health standpoint.

“While some parents may struggle with feelings of guilt or shame in not being able to afford to pay for college, it is important to practice self-compassion and understand there may be hidden blessings in this situation,” said Joyce Marter, a licensed psychotherapist and author of “The Financial Mindset Fix: A Mental Fitness Program for an Abundant Life”, who strongly recommends teaching one’s children financial literacy sooner than later.

“Sitting down with your child and explaining the cost of college and the money that needs to be raised to make it a possibility is a wonderful opportunity to teach the basics of money management, budgeting, saving, and goal setting,” Marter said. “Financial literacy is a skill that will benefit your child throughout their lifetime.”

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