Teaching Your Kids How to Save Money
Lucky the Leprechaun is known for his pot of gold. This is also his personal savings that he has accumulated for a very long time. He wanted to share with you the importance of explaining to children why it is important to have a savings.
Children learn their saving and spending habits directly from their parents. This is something that is not taught in school. It is a practice that is observed and duplicated from a grown-up that is a parental figure, so teaching your children how to save money can be very important for their future. Children who grow up without knowing how to budget, save money, mange money, or pay bills often make poor financial decisions in their future.
The following are some tips to help teach children on how to create a little nest egg that will go a long way in their future.
- Provide a means that will allow your child to earn money - This can be done by assigning them age appropriate chores and compensating them through some kind of allowance. Some parents just give their children an allowance, but do not have the chores attached to it, while other parents may create a chart of items that should be done within a week. Some suggestions for the littler ones might be; Pick up your room, make your bed, put your dirty clothes in the hamper, brush your teeth and wash your hands without being told. While some of the older children might be able to help out with the dishes, take out the trash, or even cut the grass. There is nothing wrong at all with a child learning the value of EARNED income.
- Let your child spend money - Allowing your children to purchase things or go places they want to go, using their own month will encourage them to earn money. If all of their income goes directly into a saving account, they will never learn the rewards that money can bring them when they spend it on a special toy or doing something fun like mini-golf or the go-cart track. If they don't have enough to obtain something they want, it is just fine to do a matching amount with them too, or set a goal sometime in the future once they have earned enough money.
- Be sure to teach them how to share - You want to make sure that your children also learn how to share. Maybe they can use some of their own money to buy their friend a special birthday gift, or even make their own contribution at church. When you teach them how to budget, sharing should be a part of that planning as well.
- Help your child save money - You can start out simple by giving your child a "piggy back" to save their money, but once they begin to understand budgeting a little bit more, it is now time to get a savings account at the bank. Make an event of getting the account setup. Take them with you to the bank and show them how they can check the amounts as things are deposited and withdrawn. Set a goal with them on the lowest amount that should be in the account and explain why you would never want to go below that amount. Also, this could be done with some seed money such as a gift from a Birthday Card or some start-up funds from Mom and Dad for a holiday gift.
- Develop a budget with your child - Teach your child how to set a goal for a special trip or a toy that they want. Show them how they can take a percentage of their allowance and spend it, save it, or share it. Sit down and plan out with them how long it would take for them to achieve their goal based on the amount of money they have coming in for their allowance.
- Provide positive and negative consequences - Be sure to provide positive reinforcement when your child sticks to savings goals and don’t be afraid to allow them to feel the consequences of poorly managing their money. Maybe they don't meet their goal and it has to be extended. Maybe the reach their goal sooner than planned. Either way, letting them know and showing them how to adjust accordingly will help them very much in the future.
It is totally understood that in the world we live in, not all parents have the means to provide an allowance each week for their children. There are many parents who live paycheck to paycheck, or even are not certain as to were they will find the money to pay the bills or even provide food for the family. IF THIS IS THE CASE, start off small with what you can do and teach your children the importance of saving when they can and setting some money aside so that in their future the will have same survival skills that you may be dealing with yourself. A couple of dollars a week may not seem that much, but to a child that amount would be tremendous. In a year, they would have over $100 in the bank.