Strategies to Teach Kids About Savings
Date: May 24, 2016
It takes time and effort to teach kids about money, but it pays big dividends over time. From a young age, children learn from their parents about how to manage money and regulate spending. Help your kids develop good habits by following these tips.
One way to help your child learn about money management is to give her an allowance with strings attached. Steve Schaffer, CEO of the website Offers.com, devised a system of allowances to teach his kids about basic budgeting.
Schaffer gives each of his children a base weekly allowance of $5, then adds on 50 cents for every year of the child's age. The kids must pay 25 percent of their allowance as "family tax," put 15 percent into savings and donate another 10 percent. They can spend the rest on whatever they choose. This "bucketing" system is a valuable early lesson in budgeting money.
Don't Bail Kids Out
Give your kids the freedom to make their own financial mistakes — they will learn from them. Even if your child decides to spend her entire allowance on something that won't hold her interest for very long, don't talk her out of it. She'll learn a great lesson about wasteful spending from the experience. And don't bail her out by giving her the item she decided not to buy because it was too expensive — doing that cancels out the lesson.
Encourage Savings Goals
Mention to your child that if she saves her spending money for a few weeks, she will be able to buy something that is more expensive. Help her pick a goal — like buying a special toy — and calculate how many weeks it will take until she has saved enough for it. Start her off with a modest goal, like a toy she can buy with a couple weeks' worth of savings, and make a big deal of it when she succeeds.
Open a Bank Account
Open a bank account for her — it will make her savings efforts seem more grown-up. Check to see if your bank offers student accounts or open an account for her in her own name. She'll be excited about taking money to the bank to deposit, especially if you offer to match the funds she saves. This helps her place value in saving money and establishes it as a habit. For a simpler method, find a clear container into which she can deposit money and watch it grow with each passing week.