Teaching Kids to Save

Kids and money may sometimes go as well together as well as oil and water. Teaching your children how to save money at a young age is placing time on their side- could you imagine if you saved 10% of all the money that you earned in your life?  How much would you have now? It’s probably pains you to think about this, doesn’t it. Here are a few ways to get your kids on the right savings track to be specialized in savings!

The Savings Incentives vs. The Rebel Yell

If you make it mandatory for your kids to place a percentage of their money into savings, you could very well have a “financial rebel” on your hands, especially as they get older. (You remember the rebellious teen years, don’t you?) Incentives are a much calmer means of getting your point across, maybe matching the money that they save, even if its not dollar for dollar.  This will also prepare them for the workplace and 401K’s with employer matching- and seeing how fast other people’s money adds up!

Start at the Bottom and Work Up…with Pennies!

Beginning at age 5 (when they usually stop putting coins in their mouth), kids love to collect, save and count pennies.  Let them keep all of the pennies that come into the household in their room, perhaps in an easy-open piggy bank so that they can access and count them when they want to, being sure that they understand that the money is the property of the entire family. Gradually add in nickels, dimes and quarters explaining in full how this coin is equal to a certain number of pennies. This “spare” change could add up to a family vacation for a long-term savings, or a trip out to the movies for the less patient. Whatever it is, be sure that your child is part of every stage.

By the time kids are 7 or 8, you may want to think about an allowance.  If you decide to go forward with one, be sure to teach your kids to put a certain percentage into savings, (typically 10% is the average) and the remainder for their personal spending.  Let your child know that just as you have specific areas where your personal paycheck goes, like to food, clothing and the electricity, they too are responsible for paying for something that they need.  Of course, when you’re 8, you “need” baseball cards, video games, or the latest boy band CD.

Bust out the Lemonade Stand- Ages 10 to Pre-Employment Teens

Now comes the fun part- teaching your children about earning money.  Maybe the neighbors go away for a week, junior gets their mail and earns $10.  Again, teach them to put a percentage into savings before spending the entire thing.

Say that your daughter wants a new pair of roller blades, but her birthday is months away.  Teaching her to earn the money just like mom and dad do, maybe with some extra chores around the house, or opening a lemonade stand in the well-supervised front of your house will teach her a valuable worth ethic to earn her own money for what she wants.

Any allowance money earned during this time should be looked upon as part of the family budget.  If junior wants to go to the movies, but already spent his allowance on a CD, junior’s not going to the movies- just like if mom and dad didn’t have any extra cash, they’d have to wait to see the flick, too.

Establishing a foundation for savings is much easier when it’s mandatory and becomes habit.  Having your child open a savings account at the local bank and watch the money add up is more likely to create excitement when they’re young, too. After all,  $10 is a much higher dollar amount when you’re 10 then when you’re 16. 

Teaching your kids the basics of earning, saving and spending before they go out and get their first job will save them a bit from “tax shock” and give them a solid foundation for a strong work ethic- one that they will use throughout their entire life. 

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