Learning good money habits at a young age can help build a foundation for responsible financial decision-making in the future. Consider these tips to help teach your young ones the importance of money management, especially saving.
Provide an allowance
One of the best ways to teach proper money management is by giving your child an allowance. The frequency and amount of the allowance matter less than the act of handing over money for the child to control. Use the allowance to spur conversations about planning and priorities. Teaching money basics is simpler when the child has real money to learn from and interact with.
Encourage children to make goals
One way to teach young children financial responsibility, particularly saving, is by instilling a goal-setting habit. Make a savings goal chart, and use stickers or drawings to visually demonstrate the amount of money saved each week. 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.
Open a savings account
Having their own independent account may encourage kids to save more money, and it will make them feel more responsible. Select a local bank and open an account, whether it’s a standard savings account or an account built specifically for parents and children. Consider asking the banker to discuss why saving is important so your child hears it from someone other than you.
A monthly trip to the bank or ATM where the child personally deposits their new savings and receives a balance slip is positive reinforcement that they are growing their account. Additionally, this repetition will help solidify the importance of stashing away money.
Teach the power of patience
Sometimes even adults need to be reminded they may have to wait to buy the things they want. Set an example and practice holding off on buying something by making a savings plan that you share with the family. Alternately, you can create a family goal to strive for, like a group outing or adopting a kitten, with a savings goal identified. Explain to your children why waiting a little longer for the things you want may help you save and stay within your financial means.
Consider matching contributions
Just like some 401(k) retirement plans have employer-matching contributions, consider a parent match for money your child saves. Knowing that you will add funds in when they do will encourage children to have regular savings habits.
Make sure you establish specific rules or guidelines ahead of time if you plan to match savings, and consider long-term changes to the program. For example, have a required amount your child must save each week, but anything above that can be matched by parents and added to the fund. As your children get older, the match can evolve to align with their changing priorities and employment.
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, and keep him or her involved in the savings process. 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 a more natural habit in the future.
Create a list of priorities
Before your child spends any money, write down what s/he wants and rank how essential each item is from most to least. Don’t settle on just toys or gadgets; ask your child to think long-term. Have conversations about making money decisions that are sometimes difficult, like not buying last minute concert tickets and putting that money toward a car instead—especially if the car purchase is months or years away. Keeping money priorities in place even when it means missing out on short-term items can help young ones build a solid money management foundation.
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 friends or family member gifts.
Saving and managing 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 will be better prepared for their futures.
UMB personal banking solutions offer convenience and simplicity to meet all of your past, present and future financial needs. From youth savings accounts to auto financing and everything in between, see how UMB personal banking can work with you to find the right products for your life and lifestyle.
Boost your financial know-how so you can feel prepared for an unexpected expense by signing up for our personal banking newsletter. We’ll send informative articles right to your inbox.