Teaching Children to Save Money

Teaching children to save money is becoming a priority for parents. That ability to save, that is, defer gratification, is both a part of financial literacy and of character-building. The trick in doing this is to make delaying pleasure downright fun.

A variety of games helps with that. In addition to the traditional board game of Monopoly, there is The Game of Life, Ed’s Bank Game, and Mad Money. It is up to you, the parents, to reinforce the lessons that can be learned. For example, among the takeaways from Monopoly is the reality that you have to anticipate what other players will do before you spend your money on this hotel or that. It might be prudent to save your money until you get a clearer idea of the other players’ strategies. Essentially, this introduces children to the fundamentals of Game Theory, leveraged in so many in financial fields.

A second fun tactic of teaching children to save money is to set up a savings account for them. That provides compounded interest so they can watch their savings grow. By federal law, it will be a custodial one until the children are 18. The most common type is the Uniform Gift to Minors Act account (UGMA). You will be the “owner.” However, only the children can make withdrawals. The advantage of that is that it allows the children to make mistakes – and learn from them. After they spend two-thirds of the balance in the savings account on a video game, they will recognize they have not enough left over for holiday gifts.

At an online-only bank that savings account could receive higher-than-average interest. That is because online-only banks do not have the expenses of real estate and live tellers, which brick-and-mortar banks do.

A third way to position saving as fun is to make comparison shopping an adventure. You will not have to invest too much gasoline going to stores. Most of that research can be done on the Internet. Based on what the children learn, they could package those lessons in social media via Facebook, a blog, tweets, and/or videos on YouTube. Who knows, maybe your children will become a kind of celebrity of frugal shopping.

Saving can also be framed as cool by charting progress. This generation of children is visual. Through an actual blackboard or one software-generated, inputs and outputs can be recorded in great detail. You can spice up results by matching savings at certain milestone points. When the first $100 is saved, then there is a 10 percent match of $10. For Show and Tell at school, you and your children can create a PowerPoint Presentation of the upward trajectory.

Eventually, as your children mature, these teaching children to save money initiatives could develop into the platform for careers in some aspect of finance.

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