9 Tips: Teaching children to save: easy as 1,2,3
Learning good money habits like saving at a young age will help ensure responsible financial decisions in the future. If you have children, consider these tips to help teach your young ones the importance of saving money.
Provide an allowance
One of the best ways to teach proper money management is by giving your child an allowance. According to Bankrate, working for money and enforcing good budgeting habits are two benefits to offering an allowance to your children. “When your child gets their first dollar, we suggest that you teach them to save 10 percent, invest 10 percent, give 10 percent and live from 70 percent,” said Lori Mackey, author of Money Mama and the Three Little Pigs. “When you give them a dollar, you give them two quarters and five dimes and then you sit with them and say this dime is for something that is important to you or that you want to help.”
Teach the power of patience
Sometimes even adults need to be reminded they may have to wait to buy the things they want. According to Forbes, teaching kids delayed gratification early on is beneficial in the long-term. Set an example and practice holding off on buying certain items. Explain to your children why waiting a little longer to get the things you want may help you save and stay within your financial means.
Encourage children to make goals
One way to teach young ones financial responsibility and how to save money is by making a savings goal chart, noted Money Crashers. Use stickers or drawings to visually demonstrate the amount of money saved each week to show progress. If your child wants to save up for a specific item, consider adding a picture representing what he or she wants to purchase with the saved funds as a motivation.
Consider matching contributions
A 401(k) retirement plan that matches what you put into retirement is a great way to encourage more regular saving habits. Consider implementing the same type of reward system for your child, but make sure you establish specific rules or guidelines ahead of time. For example, have a required amount your child must save each week, but anything above that can be matched by his or her parent and added to the fund.
Focus on long-term saving
When kids are between 11 and 13 years old you can begin discussing long-term goals for saving. For example, discuss a car-buying goal with your child when he or she reaches pre- or early-teens. Look at prices of current cars and discuss budget and long-term financial goals.
Work together to create a plan to save a certain amount of money, whether it’s the child saving alone, or with the parents matching the savings contributions. Understanding the importance of long-term saving goals early on will make saving for large purchases easier in the future.
Deal with spending decisions
While encouraging saving money is a good way to instill valuable skills, sometimes it’s OK to let your children learn from mistakes, noted Bankrate. “Let them make impulse buys, that kind of thing,” said Greg Karp, author of The 1-2-3 Money Plan: The Three Most Important Steps to Saving and Spending Smart. “There is an opportunity cost and it teaches that money is finite. You really want them to regret some decisions because they won’t forget them.”
Create a list of priorities
Before your child spends his or her money, write down what he or she wants and rank how essential each item is. Don’t settle on just toys or books, ask your child to think long term. Ask if he or she wants to save for college, a trip in the future or other investments he or she wants to make. Prioritizing these wants can help young ones commit to saving early.
Open a savings account
Having their own independent account may encourage older kids to save more money, and it will make them feel more responsible. Head to a local bank with your kid and open an account with him or her. Consider asking the banker to discuss why saving is important so your child hears it from someone other than you. Repetition will help solidify the importance of stashing away money.
Bankrate indicated in addition to saving, you may want to teach your children the importance of giving to others. Suggest giving a certain amount of their allowance to a charity of their choice or to use for gifts for friends or family members. Saving money is an important step to becoming a financially-responsible individual. By instilling this skill in your children early on, you can rest assured they are better prepared for their futures.
Mrs. Adriean Castro is an Assistant Vice President Financial Center Manager for UMB at the Shawnee, Kansas banking center. She joined UMB in 2003 and has 12 years of experience in the financial services industry. Adriean has a passion for philanthropy and coordinates volunteer opportunities throughout the year for UMB consumer associates. She is also an ambassador for the Shawnee Chamber of Commerce.