Once kids are old enough to start counting, they’re old enough to start learning some basics about money. Your kids don’t need to know how to invest for retirement before starting elementary school, but they need regular conversations with you to start picking up sound financial habits. The following are seven specific things you can do to help your kids learn how to save money from an early age.
1. Set Goals
As an adult, you might save money because you know you’ll need it someday. Children require motivation, so help them set savings goals for something they want. However, this needs to be balanced with goals that are realistic. Help them learn how much things cost and how to set a savings schedule, but don’t let it run too long. A year might be too much to ask of an 8 year old.
2. Making Money
Saving money is important to teach kids, but having them learn how to make money is also crucial. It prepares them for generating income as adults, and it gives them money they can save. You can start by having them save money they are given for holidays or their birthday, but you can also connect their allowance to household chores. Later on, they might take up online projects, walking dogs, mowing yards, or babysitting.
3. Where They Can Save Their Money
If your child is saving physical coins and cash, then the traditional piggy bank is a concrete item that helps them form tactile memories. As they get older, a real bank account becomes a more practical option where they can learn online skills they’ll need as adults.
4. Ongoing Conversations
There might be some things you can talk to your kid about once and they’ll get it right away. Teaching them how to save isn’t likely one of them, so plan on continuing discussions on the subject.
5. Don’t Penalize Mistakes
Everyone makes money mistakes, and your kids will make a lot because they’re still learning. Avoid lectures and punishments in favor of talking about their choices and asking them what they might do differently when the same circumstances happen in the future.
6. Needs Versus Wants
Teaching your kid to distinguish needs versus wants is a very subtle skill, and yet it can be the most significant thing that guides smart spending over the years ahead. The concept of delayed gratification is a closely related concept you should also instill into them.
7. Be a Great Example
This might be the most difficult aspect of teaching your kids how to save money, but it can also be the most successful. Children emulate their parents far more than adults usually realize, so practice what you preach to them. Admit your mistakes, celebrate your successes, and make financial discipline and saving steady habits in your life so your kids will follow suit. It can be as easy as choosing house brands of apple juice in the grocery store over the premium names.
An Essential Life Skill
Estimates suggest that between half to two-thirds of all Americans are living from one paycheck to the next as adults. They have very few dollars saved for future needs, if any. Many fall into this trap because they didn’t have financial education in their youth that taught them to practice delayed gratification and control over their money.