National Teach Children to Save Day is April 28th, 2017. Celebrate with us!
Children, as young as three years old, can grasp financial concepts such as spending and saving money. A study by researchers at Cambridge revealed that kids’ money habits are formed by age seven. Developing positive habits at an early age can create a foundation for a lifetime of responsible money management.
Here are six ways to help the children in your life learn the value of money, and how to save now for a better financial future.
Exhibit your good money management skills. That’s the very best way to get kids on the right track for a bright financial future. Kids mimic your behaviors. What kind of example are you setting?
Discuss your finances. Show the children in your life how you create your monthly budget, pay bills and balance your checkbook.
Speak with your kids about the difference between a “want” and a “need.”
Use everyday shopping excursions to teach about price comparison, inflation and the value of goods. For example, give your child $5 to spend on fruit at the grocery store. Demonstrate how purchasing five apples for one dollar is better than buying three apples for 30 cents each. Discuss adding sales tax.
Play games associated with money. Monopoly, Payday and LIFE are filled with teachable moments about saving, spending and career choice.
If your kids or grandkids are younger, give them a toy cash register. Let them get hands-on with coins and bills. Show them how to count, spend and make change.
There are a ton of age-appropriate smart phone apps for children. PiggyBot is an allowance-tracking app, geared toward kids from eight to 10 years old. Celebrity Calamity allows children to act as financial consultant to spend-thrift celebrities. It’s recommended for ages six and up. Buckaroo helps children save, set goals and create budgets. It’s designed for kids ages five to 14. An internet search will pull up a plethora of examples and reviews.
Learning through experience is more powerful than learning through instruction.
Let your kids earn an allowance. This act will allow them to begin making spending decisions and to learn the value of working for what they want.
Create a visual reminder of household tasks. Track work that has been completed, and tie it to their earnings. Encourage them to regularly save up for items they want to buy.
Give your child four piggy banks. Label them individually as follows: save, spend, invest, donate. Separating money in this way may foster long-term thinking.
Encourage your kids set savings goals. If your kiddo wants a bicycle, help him print or cut out a picture of one. Place the image in a centralized location so he can see it often. Having the visual reminder can help keep him focused on reaching his goal.
Allow your child to make mistakes, and discuss them openly. Seek ways to turn blunders into learning opportunities. Sometimes, more can be learned from mistakes than from easy victories.
Help your child open a bank account in his or her name. There are accounts available for children as young as eight years of age. Guide her through the process of opening an account and using it responsibility. Familiarize her with the act of balancing a checkbook. Show her how saving money allows it to earn interest and to grow over time.
Incentivize your kids to save money by matching their contributions to a savings account. This process may prepare them for employer retirement savings accounts, which function similarly. Adding to their contributions may encourage them to save more.
Open a 529 Plan for the children in your life. Let friends and relatives know that they can contribute instead of purchasing toys or unnecessary items. Encourage your child to add money to the account. They may appreciate the gift more if they’ve contributed some of their own money.
Teach your kids about investing by opening a custodial brokerage account for them. They may take full control over the account when they turn 18. Allow them to choose a few companies they like – maybe Disney or Google. Show them how to buy shares, and watch the investments perform over time.
If your child earns money, help him open an IRA or a Roth IRA. Just imagine the compounded interest your child would accumulate, if he starts his account at the age of six. Example: If your child invests $1,000 per year for 20 years at 5% interest, his investment would grow to just over $37,370. That’s over $16,000 in earned interest alone! Not bad when you consider their investment would be less than $85 per month.
As with any investment, there are tax considerations to be made. Please check with us before investing, and we will guide you through the specifics.
There are so many ways to teach the children in your life about the benefits of saving. Talking to kids early on and often helps to lay a solid foundation of financial literacy that can last a lifetime. Build good habits that will impact their future. Start now!
If you would like to share ways you have taught your children to save, we would love to hear your stories. We’ll publish the top responses here.