Every parent wants their children to grow up to be financially secure. And a good way to get them headed in that direction is to teach your kids to save, starting at an early age.It can be as simple as buying them a piggy bank to store their change, or you could head in a more formal direction and help them to open their own interest-bearing savings account.
Whatever methods you choose to encourage saving, it’s never too soon to promote this habit. Here are some suggestions to teach your kids to save and help them get excited about their own finances.
For the youngest crowd, the piggy bank is an approach that has stood the test of time, but a large jar or two can also do the trick. One jar can be devoted to saving enough money to buy a certain toy, while another jar can be used to save for a larger purchase, such as a trip to an amusement park. And it doesn’t hurt to have a “Little Treats” container which can be used to save for small purchases such as ice cream or stickers.
Marking each jar with a picture of your child’s purchase goal can help to visually reinforce their saving habits. Using clear jars can help with this as well, since kids can literally see their savings adding up. It’s also a good idea to place the jars in a common area such as the kitchen to give your child a sense of pride and accomplishment. You can even consider setting up your own savings jar next to theirs to further encourage their efforts!
Other incentives include matching your child’s savings contributions dollar for dollar (a child’s version of a 401k plan), and offering small rewards when certain savings goals are reached.
Once your child is around 7 years of age you can start to shift things into a higher gear and give them more financial responsibility since they’re better able to understand savings concepts. For instance, if they have their own savings account, go over their banking statements with them so they can literally see the interest they’re making on the money they save. You can also explain to them how credit cards and loans work, and what happens when they borrow money to “buy now and pay later”. You can even reinforce this concept by offering them a loan to buy a larger item upfront. Tell them that, just like dealing with a credit card company, they’ll have to stick to a repayment schedule (you might even want to charge them a little interest!).
You can also use everyday errands like a trip to the grocery store as an opportunity to bestow financial wisdom. For example, point out when you’re purchasing a generic version of a product instead of a brand name because it’s cheaper and basically tastes the same.
The more you can do now to get your kids excited about saving, the more financially prepared they’ll be down the road.