How strategic financial planning can safeguard your teen's future

Did you know that only one-third of Americans have detailed financial plans? Personal financial planning is the key to long-term success, but most Americans don’t take the time to develop and maintain a clear financial strategy. 

Teaching your kids to develop a plan will set them up for better money habits and financial independence in the future. If you want to set your teen up for better financial management, read on. Here’s how simple strategic and financial planning will benefit your teen’s future, plus tips and tools to help get your kids to create their own financial plan. 

The impact of early financial education on long-term success

According to psychologists, lifelong money habits can set in as early as age seven. That means it’s never too early to start your kid’s financial education.

Your teen doesn’t need to create a strategic financial plan that maps out the rest of their life. However, they should understand the basics of financial planning, such as setting short-term and long-term goals, managing debt, and using financial planning tools. 

Here are a few benefits of teaching your teen about strategic finance before they leave home.

Build strong financial habits

From smart spending to tracking outstanding checks, strong financial habits start early in life. You can help your kid learn to make good financial decisions by talking to them about finance and modeling good money management.

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Set kids up for success.

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Some economists suggest that spending habits are the number-one financial behavior children learn from their parents. So, developing and sticking to your financial strategies will help set your kids up for a better financial future. Involve them in your decision-making and find tools to teach them smart habits, such as Greenlight’s Level Up financial literacy game.

Achieve financial goals

Your teen’s dreams will change over time — that’s part of growing up. However, you can help them achieve their financial goals by teaching them about long-term planning and learning how to invest together. Teach your kids the difference between short-term and long-term goals. Create financial projections to show them how smart investments can help them reach those milestones. 

One helpful tool is to teach your kids about S.M.A.R.T. goals:

• S (Specific)

• M (Measurable)

• A (Achievable)

• R (Relevant)

• T (Timebound)

Even if their plans change in the future, they'll know how to define and achieve their goals through smart financial planning. 

Long-term financial security

Financial security is roughly defined as the ability to comfortably afford your day-to-day needs while saving for the future. To set your teen up for long-term financial security, start by teaching them how to develop strategic plans. 

Careful investments, debt management, budgeting, and routine financial analysis all contribute to an individual’s financial security in the long run. These are all elements of strategic financial planning, which your teen can learn as they start to manage their own money.

Key components of strategic financial planning

You might be wondering: What is a financial plan?

A financial plan is not just a vague idea about how you want to manage your finances. It’s a detailed written document that outlines your goals and the steps to reach them. A successful financial plan is thorough, realistic, and achievable. 

Below are a few key components to include in your financial plan. Remember that when creating a financial plan for a teen, you may have limited resources to work with, and their long-term goals may shift over time — that’s OK. What’s most important is that you teach them how to strategize so they have the right tools to plan for their future finances. 

1. Current financial analysis

Start by assessing your current financial situation. That includes:

• Monthly expenses

• Assets, including property, investment accounts, and savings

• Outstanding debt

• Income, including semi-monthly or bi-weekly paychecks

• Tax credits

By clearly assessing your current situation, you can start to form realistic plans. 

2. Goals

Next, write down your short-term and long-term goals. These can include things like buying a home, saving for your child’s education, saving for retirement, paying off credit card debt, and building an emergency fund. 

To help make your plan more achievable, separate your goals into three categories:

• Short-term goals: Anything you hope to achieve in the next five years. 

• Medium-term goals: Goals you want to achieve in the next five to 10 years. 

• Long-term goals: Goals that are 10 or more years away.

3. Budgeting

The first step in achieving your goals is to create a budget that will help you manage your current finances. If you aren’t confident in creating your own budget, consider using a budgeting app or working with a financial mentor. 

 4. Investment planning

The best way to grow your savings is through smart investments. Consider your best investment options and use planning tools to create financial projections. Greenlight’s Investing for Parents tool is a helpful way to make smart investments and save for your child’s education. 

Before you get started, ask yourself these questions:

• How can I safely invest my money?

• Are there any riskier investments I’m willing to consider? If those investments fail, do I have enough savings to fall back on?

• How can I save for retirement?

• What is the best way to diversify my investments?

There is no foolproof investment plan that will work for everybody. Consider talking to a financial planner who can help you develop a custom investment plan that will meet your goals while minimizing risk.

Practical financial planning tools for teens

Your teen might not have the financial resources to create a detailed plan today. However, they can start learning to manage their money by creating a financial plan example. Walk your teen through the steps to write down their financial plan, including budgeting and investment planning. 

Want to make financial planning fun for your kids? Show them digital financial planning tools that teach early money management. With safe banking tools and an investing app for kids, your teen can start managing their own money and create their plan for a financially independent future. 

Future-proof your teen's financial well-being

Early financial literacy is the key to long-term financial success. If you want to safeguard your teen's future, start teaching them about financial planning today. 

Check out Greenlight’s library of financial literacy tools for families. From educational content to early investing, Greenlight’s app can show your teen how to manage their money and get them excited about the future. It’s never too early to start developing a financial plan — get your kid on the road to success by involving them in your family’s financial planning today.