They live for today, but can they save up for tomorrow?

In the third of our series on investing for children, Sam Dunn focuses on teenage finances

Teenagers are more likely to be interested in the latest mobile phone, CD or video game than in saving their money. And since there are around five million teen-agers in the UK, with nearly £2bn to spend every year, that's some spending power.

Research from Mintel reveals that children's spending is set to rise by 12 per cent annually, reaching £3bn by 2006. But savings are suffering: nearly half the 11- to 16-year-olds questioned for a Mintel survey last June admitted they were "no good" at saving.

Young people who have regularly banked pocket money for years can suddenly lose the habit as they begin to earn cash from Saturday jobs or part-time work and develop into fledg- ling consumers. Paul Morrish, Barclays' director of savings and investments, says it is vital that teenagers do not develop a habit of overspending ahead of a working life saddled with loans and credit-card debt. "We are in a society that says 'spend, spend, spend and pay for it tomorrow'," he explains. "Young people don't save massively but it's key that they approach the age of 18 without any debt."

David White, chief executive of The Children's Mutual friendly society, says: "It's important to get kids to start thinking about what they need money for, and to under- stand there is a difference between want and need. Kids see the bit where you go into a store, hand over the plastic card and take home the goods. But it's the hard part – the saving for them – that counts, and you need to explain this."

With an eye on turning teenagers into long-term customers, many high-street banks offer free, instant-access "youth accounts", including a cashpoint card, a chequebook and internet banking.

Nationwide says young savers are increasingly interested in banking online. Its Smart account, aimed at 12- to 17-year-olds, pays 4.25 per cent interest on balances. Holders can have either a cash card, allowing withdrawals of up to £100 a day, or a passbook.

Lloyds TSB and Barclays offer free teenage accounts split into junior and senior categories. Both come with cash cards, while the accounts for older children feature online and direct debit banking.

Barclays' Plus, a combined current and savings account for 11- to 15-year-olds, offers up to 2.5 per cent interest on balances of more than £250. Its Young Persons current account for 16- to 19-year-olds pays 3 per cent on the same amount.

Lloyds TSB pays 3.55 per cent on balances of as little as £1 for all its teenage savers, and its cash card lets youngsters withdraw as much as £200 a day, as long as funds are in the account. Barclays allows withdrawals of up to £300.

While some 6 per cent of Lloyds TSB's 177,000 teenage customers use its internet service, the dedicated online banks continue to focus on adult savers. Egg, for example, says teenagers are not a viable market; it prefers to target customers with disposable incomes, particularly in the 25-45 age bracket. However, Egg's savings account – paying 3.75 per cent interest – is available to teenagers who are 16 or over.

Young people are now benefiting from personal finance lessons in the classroom. But Wendy van den Hende, chief executive of the Personal Finance Education Group, an organisation which provides resources for teachers, warns that parents have to do their bit as well: "Some schools do have a light touch on this subject. It's perfectly possible for a child to go all the way through school without learning about personal finance."