want-want-want, spend-spend-spend trap that has been set for them. In this kind of atmosphere, how are parents to teach their children the value of saving?
Just as teaching a child to choose healthy foods starts at a very young age, helping a child learn how to save should also start early. As soon as children become aware of the process of exchanging money for items they want, they are ready to understand the basics of saving. Because very young kids live in the “now”, don’t start out with expectations of building a college savings with them—they simply can’t identify with goals that are so far-reaching.
Start with a Moneybox
Instead, start with a little moneybox where they can see the coins they deposit. With my three kids, I taught them from an early age to save for a special toy or small outing—something that can be accomplished within a few weeks. As a result, one of my son Dylan’s favorite toys remains the Anakin Skywalker figure from Star Wars, because it was the first toy he worked towards buying with his own money.
Match their Savings
To spur the excitement, parents can match their savings. For every quarter the child puts into the bank, the parents also deposit one. Kids see their savings build quickly that way. It also helps reinforce the value of saving. You are in essence rewarding them for their attempt to save money. You might tape a picture of what they are saving for next to the
bank to help them stay focused on why they are saving. Where does their money come from? Simple, with my three I keep a chart with stickers next to the fridge, which they earn for keeping their toys picked up or for helping out with other little daily chores. This reward system lets them learn as they earn. Be creative and make this fun for both the kids and adults.
Open a bank account
By the time children are in third or fourth grade, they may be ready to open a bank account. It can be very disturbing to a child who is used to seeing their money accumulate in their moneybox to have it suddenly disappear. So, it is up to the parents to teach them how banks work. Their money is being kept some place safe; but it is still theirs! When Dylan was ready to get started we made a point of visiting our local bank so he could see the building in which his money would be kept.
Make interest the reward
Just as you matched their funds when they were younger, you can make a plan to chip into their savings. Interest rates are so low now, it is difficult for children to see their savings build, so this extra reward for saving helps keep their focus.
Sit down and discuss with your kids what portion of their allowance should be put in their savings. Set a minimum percentage that is always devoted to their account. They can always put in more, but should be discouraged from putting in less. You may also want to set rules for withdrawals and the minimum amount kept in the account.
The older kids get, the easier it is for them to plan for a goal further in the future. By their early high school years at the latest, they should be setting their sights on college savings and it is something I will be encouraging in my brood. Statistics show that young savers are more likely to go to college, even if that isn’t what they are saving for!
Courtesy of Motivated magazine; used with permission. Photo from www.seniorliving.org; used under CC-SA license.