Teaching Kids to Save
Who doesn’t want to help set their kids up for long term financial success?
In order to do so, we need to teach
them early about finances. Learning good money habits early on will help kids
make better choices like building credit early and avoiding unnecessary debt. Here
are a few tips to set your kids up for success.
- Start early and teach the basics first. It’s important to build good habits early on, and the best way to do this is to start with the basics: earning, spending, saving and giving. Experts recommend saving money in a clear jar because then they can physically see their hard work adding up.
- Pretend to spend. Practice by using Monopoly money. Set up a pretend store and have them practice transactions. Items such as clothing, school supplies or toys could be purchased with pretend money. It’s also important to stress the difference between needs and wants, i.e. clothing and school supplies should be purchased before that Lego set they’ve had their eye on! The more practice they get, the more comfortable they will be with money.
- Compensate them for chores. Once you’ve practiced spending pretend money, it’s time for the real deal! Compensating them for chores teaches two important life lessons, financial skills and responsibility. You could put a price tag beside each chore so that they can pick and choose what they’d like to do.
- Start with a savings goal. Keep in mind when creating goals, they should be achievable within a few weeks to a month. If it takes too long to achieve, the child may lose interest and give up, which defeats the purpose!! When they achieve their goal(s), they will build confidence in themselves.
- Let your kid make mistakes. All too often, we jump in and bail them out before the mistake is made but they won’t learn anything this way. Now is a great time for them to make mistakes while the stakes are still low. If your child wants to spend their hard-earned money on a gimmicky toy, let them buy it. Once they realize their purchase mistake, ask them what they learned and hopefully they won’t make that same mistake again.
- Celebrate the milestones! When they hit their savings goal, be sure to celebrate. Show them some positive reinforcement, which will encourage them to set new goals and be excited about saving.
- Lead by example. Children pick up habits and behaviors developed by their parents, so be mindful of how you talk about money in front of your kids. Think about your purchasing priorities when your kids are around and try to involve them whenever possible. It’s important to discuss the three buckets: spending, saving and giving. Many times, the way we spend reflects our values.
- Be honest and transparent. We can’t be afraid to share our hiccups as most times that is when the best lessons are learned.
It’s up to us as parents, to raise a
generation of mindful consumers, investors, savers and givers. At Pennian Bank,
we make it easy for you to save. Open up a Savings Account online today!