Do you recall earning your first allowance from your parents? Do you remember what you did with it? Perhaps (most likely) you spent it immediately on a new toy, video game or pair of shoes. Whatever you did with it, you probably didn't save it. If you did, however, hats off to your parents! It's difficult for children to understand the benefits of saving when they don't have to pay for bills or unexpected expenses. The following is a list of amazing tips that can help children understand savings, as well as how fun you can make it!
1. Walk the talk
The best way to teach your children about saving is leading by example. Have you ever taken your child to the bank? Fun stuff, right? You may be able to talk them through what you're doing, but they may not understand it well. Perhaps a better approach is when you purchase something at the store and include them in the budgeting, planning or price comparisons. This could be difficult depending upon the age and attention span of your child. But you know how kids always ask "why"? Well, here is a perfect opportunity to take advantage of why you exchanged a 3 pack of toilet paper for an ultra-strong-mega-double-plus 12 pack. Or vice versa; one, explaining that spending more today is not as important as saving for something in the future and the other explaining how quality "pays for itself".
2. Keep it simple
No matter what age you start to teach your children about saving, speaking their language is important. So instead of talking about money, try making it into a game or something fun. Kids love competition, so challenge them to save a designated amount each month. If they're able to do this, reward them with a bonus or other incentive, like a trip to Chuck-E-Cheese. If they don't, then they do not get the bonus. For older kids, try matching their savings each month or year, much like how employers match 401(k) contributions. To go a step further, check out this article from Forbes on teaching investing to kids.
3. Make it enticing
Much like the previous tip, your child is not going to be interested in a conversation about finances. You can make it fun by playing Monopoly or creating money jars with different labels like "Spending", "Savings", or "Donating". Then give them cash for their allowance, that way the can see the amount in the jars. Try creating a countdown savings thermometer with them for a family vacation to Disney or anything else they would look forward to. This will help visualize their savings goals.
4. Let them make mistakes
So you've given your child their first allowance and they want to go open a savings account...haha - highly doubtful! In all likelihood, they want to go spend it immediately. This isn't a bad thing, even if you're trying to teach them about saving. Once it comes time for their next allowance, you can encourage saving the money for a long-term goal - as the item they previously purchased is probably buried under the bed. But a small-scale mistake at this age is better than a big mistake later.
5. Be realistic
Kids often want the most expensive "status" item. What's the fad? It's whatever your child is begging for. But it's important to show kids how to prioritize and live within your means. Giving them extra money just when they ask is not a recommendation for worthy money management skills. Something to consider, because it can be difficult when Bobby down the street has the latest gizmo, is to lend your child money, much like a loan. Set a timeframe when they have to pay you back. You could even go as far as charging them interest. That may seem a little excessive, but it will teach them how loans and credit truly work.
There are tons of ideas and tips out there to help you teach children about savings (see links below). Something to keep in mind, is that it is never too early or late to begin teaching. Let them learn from your daily actions and keep it simple, fun and realistic. Don't give up if you find it difficult for information to stick; finances aren't a particularly interesting topic to kids. It needs to be taught in a manner they can relate to. Who knows, you may learn something along the way, all the while enjoying the fun with your children.
Money games for kids: www.thebalance.com/money-games-for-kids
Teaching the value of money: www.kidactivities.net/teaching-kids-value-money/
Savings tips for your child: www.investopedia.com/personal-finance/10-tips-teach-your-child-save/
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