How to implement better money habits at any age

Habits drive a lot of our day-to-day behavior. And they certainly affect our financial situation, as each spending or saving decision contributes to our financial futures.

Working on developing better money habits is an excellent goal. Whether your objective is to achieve financial freedom, become a homeowner, pay off high-interest debt, or share financial education principles with your kids, working on your own money habits is a great place to start.

Good money habits help us improve our financial wellness, while bad financial habits can drag us down. When it comes to long-term goals, our habits are key.

This guide covers all the details — for both parents and teens — that can set you up for a brighter financial future.

Build better money habits — start with the why 

If you don’t understand why you’re trying to implement a new habit, it’s unlikely to stick. For best results, think carefully about the true “why” behind your desire to change your financial habits. 

Maybe you want to save more money. That’s great! But get more specific: What are you saving for, and how might that change your future? 

Or perhaps you want to reduce financial stress. A worthy goal — but what does that mean for your lifestyle, exactly? 

Try to detach from societal expectations (“you should own a home by age X”) and focus more on what is truly important to you. 

For parents: Find your own “why,” then explain it to your kids. Give examples to your kids in your day-to-day life — “I’m going to skip this optional purchase so that I can put an extra $20 toward our vacation fund.” Help your kids find their own reasons for developing better money habits, like saving up for trip souvenirs or a new toy. 

For kids and teens: Money is a tool. It can be spent, saved, invested, or donated. If you had $50 to spend right now, think about what you might use that for. What would benefit you or someone else the most? 

Consider your current habits

Before building better money habits, it’s wise to take a look at your current habits. Financial habits can include how you:

• Spend money

• Save and invest money

• Manage your money

If you’re not already using a budget, now could be a good time to start. A first step might be to track your spending for a week, then add up the totals. How much did you spend on optional purchases, like entertainment or restaurants? Was it more or less than you thought? 

You may also want to assess your saving, investing, and money management habits. Do you routinely check on things, or do you ignore parts of your finances? Are you saving money? 

For parents: Track your spending and take a close look at your overall financial habits. Then, recognize that kids learn by example. If you want to help your kids build better money habits, you should start with optimizing your own. Consider using Greenlight with your kids to help them observe their own spending habits.

For kids and teens: Think about the last time you spent money. How did you feel afterward? Was your purchase worth it, or do you think you would have preferred to use it for something else? Then, have some fun while learning more about budgeting with Greenlight’s Level Up money game!

Automate what you can

A lot of our financial life can be automated. This reduces the amount of active effort required and also helps us establish our priorities. 

Using automatic payments and transfers, you can:

• Make sure all your debt payments and bills are made on time

• Prioritize saving over spending

• Reduce the amount of time you spend managing your finances

A common strategy here is the “pay yourself first” concept. This strategy encourages you to prioritize your own goals. Maybe you want to build your retirement savings or pay down student loan debt. You can set up automated transfers to your savings account or debt repayments for each time a paycheck comes in — before you start paying bills or making any optional purchases. 

For parents: Automate your finances, and explain it to your kids if they show interest. For instance, you could explain that you’re paid $2,500 every two weeks, but $300 goes right to savings, $200 goes to debt repayments, and the remaining $2,000 is left for rent, bills, and other expenses. 

For kids and teens: You might not have a lot of money coming in yet, but that’s OK. You can still automate what you do with your allowance. With the Greenlight app, you and your parent can decide how much of your allowance should be automatically divided between the following categories: Spend Anywhere, General Savings, Giving, and Cash to Invest. Plus, you can use the Round Ups feature to automatically boost your savings. 

Understand the trade-offs of every spending decision

Each time you make a decision with your money — even something as small as buying a sandwich for lunch — you are accepting a number of trade-offs. 

What does that mean, exactly? Well, if you spend $13 on lunch, that’s $13 that you simply can’t use for anything else. 

It seems obvious. But it can be eye-opening to think about the long-term effects of these trade-offs. 

Let’s look at an example. Say you can make a sandwich at home for $3, but you typically buy a quick lunch each workday for $13. That daily spending decision is costing you:

• $10 per workday

• More than $200 per month

• More than $2,400 per year 

And it gets even more impactful when you think about other uses for this money. If you chose to make lunch at home and invested $200 per month and earned 7%* average returns, you would have:

• $14,519.68 after five years

• $34,603.78 after 10 years

• $102,281.21 after 20 years

Those are some expensive sandwiches! 

Note: Takeout is delicious, and it’s OK to treat yourself sometimes! This is simply an easy example of these trade-offs that we all make every day. The key idea is to think more broadly about the trade-off to prevent overspending and to consider how these trade-offs affect your finances long term. 

For parents: Before making your next purchase, take a step back and ask, “What else could I be doing with this money? Is this decision in line with my goals?” Learn more about how you could start investing with your kids using the Greenlight app, and try to set an example for your kids by making intentional spending decisions. 

For kids and teens: If you buy something now, you can’t save that money for a bigger purchase later. Think about something special you want to buy — and the next time you are about to spend money, think about whether you want to go through with that purchase, or save it for that special item you want to buy in the future. 

Set clear goals — and track your progress

Building good habits works best when you’re working toward specific goals. Building better money habits is no different. 

Whether you want to pay off credit card debt, start an emergency fund, improve your credit score, start saving for your kids’ education, or work toward other financial goals, it’s time to get clear and specific. 

Consider using the S.M.A.R.T. goals framework. Goals should be:

• Specific: Clear and well-defined

• Measurable: Trackable and easily measurable

• Attainable: Realistic and possible 

• Relevant: Aligned with your desires and objectives

• Time-bound: Achievable within a certain period of time 

An example of a S.M.A.R.T. goal would be: “I will save $50 per month in my child’s college savings account, and I will transfer the money on the fifth of the month.” This is a much better goal than “I will start to save money for college.” 

For parents: Set your own goals, and then share them with your kids. Remind them (and yourself!) of those goals when you’re making day-to-day decisions with your money.

For kids and teens: What money and savings goals do you have, and how can money help you achieve them? Focus on what goals you want to work toward, then ask your parents to help you come up with a plan to reach those goals. The Greenlight app has a useful Savings Goals feature to help!

Celebrate the wins

It’s good to work hard toward your personal finance goals, but it’s equally important to celebrate the wins!

Throughout your journey, think about how you can reward yourself for solid progress toward your financial plans. Maybe you can reward yourself with some extra spending money if your checking account or retirement account balance exceeds your goals for the month. Or maybe you can celebrate progress toward a good credit score by taking yourself out for a nice meal.

It doesn’t have to be a big ordeal — just remind yourself that you’re making progress toward financial success, and that you’ve earned a treat! Life’s all about balance.

For parents: Reward yourself, and also think about how you can reward your kids with some extra money or fun rewards if they make their own progress. For instance, one idea might be to “match” their efforts toward their financial goals. If they want to save $200 for a trip, consider offering them extra cash — a $100 bonus, for instance — if they reach their goal on their own. You can also reward them for saving with Parent-Paid Interest.

For kids and teens: Celebrate your wins! It’s OK to be proud of making responsible decisions toward your financial health. To celebrate, share your wins with your family, or buy yourself a tasty treat!

Develop better money habits with the Greenlight app

We’ve talked a lot about how to develop good financial habits — but there’s a simple trick for parents, teens, and kids: Use the Greenlight app. Greenlight is a debit card and money app for kids and teens, and parents also get their own version of the app. 

Greenlight offers a debit card, investing capabilities, cash back on purchases, generous rewards, and so much more. There’s even Level Up, a financial literacy game that makes learning money skills fun! 

Want to test it out? Try one month of Greenlight, on us. 

*7% return taken from Shiller’s data where, since 1971, the S&P 500 has delivered an annualized return of 7.58%—or 10.51% with dividends reinvested.