It may or may not have worked for you, but that shouldn’t stop you from teaching your children to save for the future. Saving is a financial tool which will serve them well in the future and there’s no need to be rich to start.
The optimal way to help children learn about savings is to demonstrate, using your own budget, that ‘needs’ must come before ‘wants’ when it comes to spending. It’s critical to explain to them that paying for food, clothing and shelter are the keys and that things they ‘want’ are simply the icing on the cake.
- Teach them to earn money on their own
- The importance of savings goal
- Give them a place to save
- It’s all about Wants and Needs
- Track spending like it’s a game
- Provide them incentives to save
- Mistakes are the best teacher
- Set yourself up as a ‘creditor’
- Speak honestly with them about money
- Be the best example you can be
It’s not an ‘allowance’ if kids work for their money. More than two thirds of parents say they paid their children an allowance, and most say that amounted to around $25 a week for six hours of labor.
Kids need to see advice in action and not just hear what it is you think they should do and why. If you let them see your savings goals it can motivate them to emulate your good practices. It also helps if they have goals which are achievable and broken down into smaller steps. Showing them how long it took you, and the path you took, to saving for say, a new fence or a new appliance, will demonstrate for them how long it takes to reach a goal. It also shows them a clear path to whatever it may be that they want based on how fast their savings add up.
You might think a piggy bank is the way to go, but setting them up with a checking or savings account – a real one at a bank or credit union – helps them emultate your habits. It also provides an online tool you both can use to track their progress. It’s a modern world, and if you haven’t noticed, your kids are rather sophisticated in their ability to deal with the internet.
Tracking their spending is an ideal way to show your kids where their money is headed out, and documenting their daily, weekly and monthly spending will open their eyes to their habits. It aids children in considering how and where they’re spending and helps them identify how spending impacts their savings goals.
We’re all motivated by opportunities to maximize our savings and most of us are more than happy to take advantage of any contributions employers make to that goal. If the kids are lacking motivation to save, offer them an example of that ‘matching contribution’ to help them stick to the plan. If your child decides they need a new bike? Offer them a 25 percent match to their savings. Nothing motivates savers like free money…
You learn more from your mistakes then you learn from you successes, and when kids manage their own finances, you can take advantage of any teachable errors they make along the way. It’s rough to stand aside as you see a kid make a ‘mistake’ with how they manage their money, but over the long haul, it’s those errors they’ll remember most and it allows them to take responsibility for their actions.
Try acting as a ‘banker’ to your child. Consider lending money to your child and require payment – with a hefty interest rate – to cover their debt. That strategy provides a clear message that impatience comes at a price and that waiting can save big money.
Studies say that just under half of all parents never discuss money with their children, and that’s a major omission. You can make the conversation a regular feature of your interaction with your kids via a weekly ‘kitchen roundtable’ where you share your strategy and question them about their strategy. Kids love games, and they particularly enjoy a chance to see that you’re listening to their concerns and available to help them understand complex problems.
And lastly, and perhaps most importantly, the example you set in saving for emergencies, retirement or their college education will carry more weight than any lecture you can give them about saving. Take it to the next level and pick something to save for together with them like a vacation or a fun item like a gaming console.
Teaching your children to save for the future is a gift you can give them which will continue to serve them long after you’re gone. And who knows, if you actually listen to them they might teach you about investing in bitcoin or get you started on the road to being a Tik Tok influencer…