Getting kids hooked on saving

The earlier you start learning about the value of money and how to save it, the easier it is to achieve financial success.

If we teach our children about saving money we are passing on powerful information that will benefit them for the rest of their lives.

I’ve broken my approach down into 6 stages and I would love to hear back from you in the comments below.

Children as young as 3 and 4 can be inspired to start saving as long as you link the concept to a toy or treat that they really, really want. You’ve got to turn saving into something with a tangible goal that they can relate to otherwise it’s too abstract for little kids to understand.
So the next time your child clamors for a new Barbie or a Bob the Builder set, put the word out nicely but firmly that you’d be happy to help her save money so she can buy the toy herself. Kids love to be given responsibility and the chance to participate in grown-up activities.

The problem, of course, is that without the benefit of a regular paycheck, or even an allowance in the case of most preschoolers, kids typically don’t have a regular source of income. And even when a young child does get an allowance, the amount isn’t likely to be big enough to enable him to save a meaningful sum in a reasonable period of time. (Weekly allowances for a child of 5 or under typically range from 10 or 20 cents per year of age up to $5, depending upon the child’s maturity and the parents’ preferences.)
So help devise other ways to come up with the money he needs. You might suggest going on a treasure hunt, searching under sofa cushions and in other nooks and crannies for stray coins. Offer him the opportunity to perform simple chores that are separate from those he’s expected to do–say, feed the dog, set the table, or water the plants. Suggest he add any money he’s received for birthdays and other holidays to the stash.
Starting at age 5 or so, he might also run a lemonade stand or hold a yard sale of toys that he’s outgrown to come up with extra cash. You’ll probably have to help your child every step of the way, but that’s okay, you just want to transmit a simple idea: acquiring the money to buy the things he wants will take work.

As a further incentive, consider contributing to the cause yourself–for example, kick in a quarter for every quarter or 50 cents that your little one manages to save. From a practical standpoint, matching enables your child to reach her goal that much faster, which is important when you’re dealing with a short attention spans! Just as important, it’s a powerful way to say ‘You’re doing a great job. Keep at it.’

Kids have to have a visual and tactile relationship with their money to really understand what saving is all about. To drive the concept home I suggest using a clear container for a piggy bank–an old jar will do–so your child can see his pile of coins growing bigger. You might also tape a picture of the item he wants to buy onto the bank so that he’s reminded of the reason he’s saving every time he puts money in. Then periodically take out the cash and count what he’s accumulated so he gets a sense of his progress.

To prevent the littlest savers from becoming discouraged, help them achieve their initial goals in a relatively short period of time–probably no more than a week or two, and perhaps only a few days for a preschooler’s first foray into saving. If the process takes too long, little kids lose interest and that particular teachable moment will be gone forever. This may mean overpaying them, at least initially.
Eventually, of course, you’ll want to pay a more reasonable wage for household jobs and give your child a more realistic idea of the effort that goes into earning money. But it’s important for you to help a first-time saver understand that she can’t get something for nothing–that is, you need to work and save for what you want in life. That’s a big enough lesson for first-timers. With each subsequent goal, you can stretch out the time span and shrink your own contribution.

When your child finally saves enough money to buy the item he wants, praise his efforts. Admire his toy. Play with it together. The better he feels about the experience, the more likely he’ll want to repeat it.
You should feel good about what you’ve achieved too. Helping a child learn to save money teaches him to plan, prioritize, delay gratification, and work for what he wants in life. This on its own is a great gift for a parent to give to a child.