I’m grateful for my parents who taught me to save money when I was young. Because of what they taught, I was able to save almost enough money to pay for college. If you want to know more about that story, read the post My Financial Life Journey and the Lessons I Learned.
Teaching children to save money isn’t easy. They usually want to spend money they receive immediately. For younger children when it comes to learning concepts like saving, visuals and physical interaction are important. Here are some ideas how to teach young children how to save.
1. Set a Good Example
One of the best things you can do is let your children see that you save money too. Place money in a jar while your children are watching and tell them it’s your savings jar. Let them know what you are saving for to buy. Most young children want to be like their parents, and seeing you do it will provide them with money lessons that will further inspire them to save.
2. Use Different Envelopes/Jars
On either envelopes or jars, have your children draw pictures of what they want. Teach them to set aside money for short-term goals, such as a specific toy, and long-term goals, such as a trip to Disneyland. And have another container or envelope for spending on everyday items. Help your children understand that it will take longer to save for some items.
3. Open a Savings Account
In addition, open a savings account for your children. Encourage them to deposit a portion of the money they earn into a savings account. Help them track the interest they earn on the account so they can see it grow.
4. Make a Savings Goal Chart
Once you know what your child wants to purchase with the money he or she saved, figure out how many weeks it will take to save money for it and make a chart. Represent each week on the chart with a box and have your child put a sticker in that box when she earns money and set it aside. This way your child can track the progress visually and know that she is getting closer to the goal.
5. Offer Rewards for Saving Money
Consider rewarding your children for saving their money. For example, if a child doesn’t spend any money for a certain amount of time, provide a small reward or treat. You can also make the prizes better the longer your child saves, such as stickers, an extra 1/2 hour of video games, toys, special outings or whatever motivates your child.
6. Match Your Child’s Contributions
A “savings match” can be a great way to encourage children to save extra money and get an early peek at the benefits of a company match for a retirement savings program such as a 401k. For every dollar your child saves, offer to put in a matching contribution. When they are little, you might be able to match 100%. Once they are older 25% or 50% might be reasonable to encourage them to save.
7. Help Them Spend Money
Occasionally, children will get so focused on saving their money that they won’t spend any money along the way. Help them enjoy their money by spending some on small purchases or surprising them by buying something they’d like.
For ideas on how to help older children practice saving money, read How to Teach Your Children to Save Money (Part 2).