The most important thing is to make saving fun from the beginning. Plus, the earlier you start teaching your children to save money, the better off they'll be. Even toddlers can do it, but you must teach this concept in a way they'll understand. Then, as your child grows, you can introduce more sophisticated saving strategies.
Making Saving Fun
When it comes to learning concepts like saving, visuals and physical interaction are important, especially for young kids. With that in mind, here are a few ideas to teach them how to save:
|1||Use Different Containers||
On an envelope, jar, box, or whatever you choose to use, have your child draw a picture of what they want. Create a different container for each item. You may also want to help them understand some items will take longer than others to save for.
For example, the short-term savings container might have a picture of a specific toy, while the long-term container might have a picture of a trip to Disneyland. Teach them to set aside money for both goals, and have another container for spending on everyday items.
|2||Make a Savings Goal Chart||Once you know what your child wants to save for, figure out how many weeks it'll take and make a chart. You can represent each week with a box and your child can put a sticker in it once the money from that week's allowance is set aside.|
|3||Offer Rewards for Saving Money||Consider rewarding your child for saving their money. For example, if they don't spend any money for a certain amount of time, provide a small reward or treat. You can also increase the value of the prize the longer they save. Try stickers, an extra half-hour of video games, toys, or whatever motivates them.|
|4||Set a Good Example||One of the best things you can do is let your child see that you, too, put money in a jar while they're watching. Tell them it's your savings jar. This will show them that saving is normal. Plus, since most young children want to be like their parents, seeing you do it will provide them with money lessons that further inspire them to save.|
|5||Match Your Child's Contributions||A "savings match" can be a great way to encourage them to save extra money and get an early peek at the benefits of a company match for a retirement savings program like a 401k.|
Helping Older Kids Practice Saving
As your child gets older, a goal chart may be less inspiring, and drawing pictures on an envelope tends to lose some of its charm. However, you can still set an example of saving and match their contributions. Plus, it's always a good idea to have different jars or accounts for different purposes.
|1||Open a Savings Account||
When your child is old enough to understand the concept of interest, you can look for savings accounts that earn interest - like our Youth Super Saver. Help them open the account and explain the importance of compound interest.
|2||Help Your Child Prioritize||
Have your child write out a wish list of things they want to spend money on and prioritize that list. Ask them to think long term as well. How about a nice laptop for college, a graduation trip to Europe, or even the down payment on a car?
Then have them allocate an amount of their allowance/income to that goal. These are the beginnings of a financial plan and this type of thinking will serve them well in the long run.
|3||Let Your Child Make Mistakes||Sometimes the best lesson comes from a poor decision, especially when your child is young, and the financial loss won't be so great.|
|4||Play Games||There are many games available to teach financial concepts to children. Monopoly and The Game of Life can teach money management skills, as well as the importance of planning ahead.|
|5||Talk About Money||While you may not want to discuss your salary in front of your children, you may want to let them hear you discuss your financial plan and the arrangements you're making for retirement. This could simply be having a conversation with your significant other while your children are in the room. In this way, they can understand that saving is a lifelong endeavor.|
|6||Look for Good Deals with Your Children||Help them understand that one of the keys to saving money is looking for deals on purchases.|
Teaching your children how to save is an important step in preparing them for financial responsibility and a secure future. But it won't go very far if you don't "practice what you preach" and save for the future yourself. Whether we like it or not, most of us take after our parents and emulate the habits we observed during childhood. The eLearning section of our website can provide you with Financial Learning and even counseling at no cost to you, if you need it.
Source: Money Crashers