Good savings habits start at home. Whether you’re budgeting, saving, making retirement decisions, or assessing workplace benefits, share the choices you make with your children, no matter their age.
Take, for example, my two oldest grandchildren, T’Aliyah (10) and Tavarius (9), I am teaching them how to manage their allowance and any financial gifts they receive. They kick and scream, but when I pull up their accounts and show them their balances, they are pretty proud of themselves and what they have achieved.
Now Tevin (6) and A’Lona (5) are a little bit different. They don’t receive an allowance, but they do have money from time to time. I teach them to spend some and to put some in their piggy banks. They get to feel how heavy their banks are and they each have a picture of something they want, so when they reach the price of the toy they can take part of their savings and buy it. Little do they know they have the amount right now, but I don’t want them to use all of their savings to buy a toy, so that will be my secret.
I love to discuss saving with them and setting savings goals. I also tell them about mine and Pop Pops savings goals. Since they live in the home with me, it really gives them a sense that they are included in our financial well being. It also teaches them financial literacy. Here are some suggestions on how you can teach your little ones to save.
START WITH A PIGGY BANK
A piggy bank can be a great way to teach your kids the importance of saving while giving them an easy way to do it. Tell your kids that the goal is to fill up the piggy bank with dollars and coins until there is no room. Illustrate that the piggy bank is for saving money for the future and that the more they save, the more their money will grow.
OPEN UP A BANK ACCOUNT
Once the piggy bank is full, take your child to the bank to open up a savings account for them. Have them count how much money is going to be deposited, so they can have a physical understanding of how much money they have. Show them the final number and reinforce the idea of interest.
It can provide a great source of motivation for your kids if they understand that their money will grow over time as long as they don’t touch it. A great example of compound interest is to show how doubling a penny once every day for 30 days will eventually generate $10 million dollars!
USE SAVINGS JARS
When your kids really want the latest and greatest toy or a new action figure, let them know they will have to save up for it. Give them a jar for each of their desired purchases and offer them a small allowance each week in a denomination that encourages savings.
For example, if you give your child five dollars a week, give it to them in one dollar bills. They can save all their cash for one purchase, or they can contribute to different “jars” for various savings goals.
To encourage saving up for their short-term goals, put a picture of their desired toy or item on the jar, so they have a visual reminder of what they are working towards.
CREATE A TIMELINE
As a kid, the concepts of money and time can be hard to grasp. Research has shown that the impact of a one-hour financial lesson wears off after about five months. In order to make the message stick, money education should be timely and ongoing. If you know your child receives a $50 check for their birthday each year, the moment to talk about budgeting is right before receiving that check.
One way to keep money lessons ongoing is to create a timeline so that your child can visualize when they will reach their goal.
Let’s say you give them five dollars a week and they want to save up fifty dollars. If they saved one hundred percent of their allowance, they’d reach their goal in ten weeks, or roughly three months.
Start by getting a long piece of paper and a marker. Have $0 on one side and $50 (or whatever goal amount) on the other side. Create checkpoints on the paper for when they reach 25%, 50% and 75% of their goal.
Every time an amount is saved, draw a line illustrating how much was saved. Let your kids know that they will get small rewards at each checkpoint. Small rewards can encourage kids to keep going. Visuals are also helpful in illustrating their savings goals and how their money is growing.
LEAD BY EXAMPLE
Children learn by example, so the best way to teach your child about saving money is to save money yourself. Have your own jar of money that you put funds in regularly. When you’re out shopping, show your children how to discern between various prices and explain why buying one item makes better sense than another.
Reiterate the message that every time you get paid, you save a portion of your check to help prepare for the future.
START A CONVERSATION
One of the most important things you can do is to start a conversation about money and the importance of saving. Money doesn’t have to be scary or a taboo. Use financial discussions as teachable moments. An innocent question such as “Are we rich?” can be answered in a way that emphasizes family values, such as hard work and responsible spending.
Let your children know they can have an allowance, but it’s up to them to save up for things they really want. In addition, illustrate how much their money can grow over time if they save.
Also, discuss the difference between needs and wants and tell your children you are always open to talking about money and new ways to save. Ask them about what they want to save up for. Ask them what they want their future to look like.
Asking good questions can get them to think long-term and have a positive relationship with money. Letting them know you’re always open to having a conversation about money can encourage them to ask questions of their own to keep learning.
Teaching kids how to save money may seem like a tough task. It has even been said that parents are more likely to talk to their children about sex than about money. But using these tips, you can make your child’s understanding of money fun and accessible. It’s an investment in knowledge which truly pays the best interest.
What methods do you use to teach your children to save? Pop them in the comments, I am always looking for new things to incorporate into my grandchildren’s financial literacy program.