Teaching Your Child About Money
Learning to save money is important for a secure financial future — and it’s never too early to start teaching your kids savvy saving habits. Follow these tips to help your kids start building a sound financial foundation, so they can get out and pursue their dreams with a money-wise mindset.
How to Teach Kids to Save Money
Get a piggy bank. Think of a piggy bank as their first savings account. It’s a simple and fun way for kids of any age to start learning about money. Tell them the goal is to fill up the piggy bank until they can’t fit any more coins in it, and when it’s full, take them to the bank to cash it in. It’s important for them to visually see how their money has grown, and you can highlight the importance of taking time to save for the future.
Separate jars. Mastered the piggy bank? Consider this method the next step up. Having a number of separate jars teaches your kids how to budget into different “accounts” — designate one jar as their “fun money” that they can spend whenever they want, one jar for short-term savings (for a toy perhaps), and one jar for long-term savings (like for a car or college).
Make a goal chart. An important motivator for saving money is having an end goal in mind. Talk with your child about what they want to save their money for, then make a goal chart that tracks their savings. This will give them an idea of how much they need to save and an estimate of how long it will take them to actually save up. And, since kids are usually visual learners, illustrating their savings goals will help encourage them to continue saving. Have fun with the chart by using stickers and small prizes as rewards for reaching a certain amount.
Obviously, different age groups will have different goals in mind. They might simply be saving for a wristband to the fair or a cool toy, but the older they get, the more you can start teaching them the importance of saving for a car, college or perhaps even bigger things like saving for a down payment on a house.
Open a bank account. Opening a bank account with your teen is a valuable way to teach them how to be responsible with their own money. Most banks allow someone as young as thirteen to open an account, with the parent as the co-owner. Go with your teen to set up the account and walk them through the process of depositing and withdrawing, and also explaining the difference between a savings and checking account.
Be sure to explain to them that every time they use their debit card, money is deducted from their account. Teach them the downsides of overdrafting, but let them make their own decision on whether to use the overdraft option. Overdrafting is usually a hefty fee, so doing it even one time can seem like a big hit to their account, which may help teach them a valuable lesson on managing their money.
And, while balancing a checkbook might seem like a dated method for your tech-savvy teen, you can teach them to easily manage their account and track their spending online.
Provide ways for them to make money. If your child isn’t old enough to have a job, find ways for them to make money at home. Whether it be a weekly allowance for completing chores, or earning a coin to put in the piggy bank at certain milestones, it’s important that they learn the value of working to earn their money. Check out our smart guide to kids and chores.
Teach good spending habits. Since kids typically learn by example, make sure that you’re making good financial choices that they can imitate. Look for deals with your children when you’re out shopping and be sure to compare prices. Use it as a teachable moment and explain why buying one item is a better financial choice than another. You can even set out your own jar next to their savings jars to visibly show them you’re saving money too. Here’s six little ways to save big money.
Teaching your children to save their money is an important step to prepare them for future financial responsibility. Using these tips will help your child better understand how learning about money at an early age will help them reach future goals of theirs later on in life.
Related Topics: Saving Money