Why is it Important to Teach Kids to Save Money
- Saving money is a crucial life skill but not one that comes easily.
- 54% of American adults live paycheck to paycheck because they were never taught to make saving a priority.
- Starting to teach kids early will create a habit of saving and continuing throughout their lives.
Tips on Talking to Kids about Saving
- Discuss Needs vs. Wants – Basic needs (food, shelter, clothing, transportation, education, etc.) vs. Wants (movie tickets, candy, designer clothes, etc.). Be specific, as this can be confusing for kids. This conversation will help you explain how important it is to prioritize expenses.
- Kids Need to EARN their own money – To learn how money works, you have to have money. Giving money to kids will not help them understand how to manage it. They need to EARN it. Be creative and help them figure out jobs where they can earn money, and not always from you.
- Help Kids Set Savings Goals – Just telling your child to save money without an explanation will be pointless to them. Help them define a goal (or multiple goals if they are older). Be sure to have them write it down. Then help them break it down into bite-size pieces so that they can accomplish it.
- Give Kids a Place to Save Money – When kids save money, they need a place to put it. When they are younger, you can use piggy banks, jars, or something like that. Be sure they are see-thru to see the money growing (getting higher). Once they are older, it’s time to introduce them to the bank and open a savings and/or checking account.
- Have Kids Track Their Spending & Savings – Being a good saver is knowing where your money is going, so you don’t wonder where it went. Tracking can be done manually (always an excellent way to start as you see things better), or as they get older, their accounts will have statements. If you are more high-tech, there are several apps to track spending…be aware of possible fees.
- Offer Savings Incentives – Do you like incentives? Well, so do kids! After all, who doesn’t like free money? If you have a hard time getting a child to save money, offer incentives such as matching their savings once they hit a certain point/percentage or an award once they hit a savings milestone.
- Let Kids Make Mistakes – This can be hard for parents, but it is essential to the learning process. You would rather them make mistakes now than later, as they get much more expensive the older they get. When you see it happening, make it a teachable moment.
- Act as Your Kids Creditor – We want kids to learn to NOT live beyond their means, and this lesson will help them understand that instant gratification can cost a lot more. This is not something to do all the time, but pick a few times where you can really show how money can add up with interest. Be they keep a log of payments, interest, and the owed amount. It will help drive the point home.
- Make Money Conversations part of Daily Life – Studies have shown that parents don’t like to talk to their kids about money. There are many different reasons for this, but unfortunately, they will not learn it anywhere else. Financial literacy is not taught in schools, and certainly not to the needed extent. Make money a part of the daily conversation. Don’t lecture … it will go in one ear and out the other.
- Be a Good Example – Kids are watching! Don’t get caught in the “Do as I say and not as I do” trap. If you say one thing and do something else, they will do what you have done; otherwise, why would you do it?
Game Time: Needs vs. Wants
Now that you have discussed Needs vs. Wants, it’s time to quiz your kids!
- Pick items out around your house and ask if they are a NEED or a WANT?
- This game can be played almost anywhere.
- Keep the fun up throughout their childhood until they seem to understand the concept.
- Have your kids explain why they answer the way they do.
- It can be tricky at times, especially with those things that can go either way, such as cars or clothes. They must understand the difference between basic and designer/luxury.
- Let’s face it … this is a concept a lot of adults have problems grasping at times! Tell me I’m wrong?