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.
Set a specific goal
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.
Brainstorm ways to come up with cash
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.
Match their efforts
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.’
4Make the process visible
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.
5Keep the time frame short
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.
Celebrate the achievement of a goal
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.
20 Comments
These are good tips. I think the one about keeping the time frame short is an astute one. Kids tend to lose interest far more quickly than we do, so getting started and building momentum is key. Short time frames are a good way to help facilitate getting that process started.
I agree, and think this is a unique point that doesn’t get discussed too often!
Getting kids thinking about money – counting money, saving money, setting goals – is so important. I teach a 6th grade math class during the school year and it’s very apparent which students have absolutely no experience with money, and those that do (as in the ones that do can actually count coins and bills!) Starting them early is key.
Giving kids an understanding and a chance for practical application when it comes to cash is SO important. Great tips!
Thanks, Stefanie!
I agree that the sooner you can start encouraging children to save, the better. It really is possible to begin teaching these valuable money lessons when children are as young as 3 years old. I think your point about keeping the time frame short is spot on – children can forget why they are saving and lose interest really quickly.
My daughter is just 5 months old, but these ideas will come in handy when she’ll be old enough to know about money..
Good points, and I think many of them would work with adults too
Ha ha… you’re not wrong there!
I think #5 is pretty important. At least when I was a kid I lost interest pretty quickly, so if I couldn’t see the benefit for me for doing something in a short term, I’d most likely forget about it (let along taking any lesson from it!)
Making financial education a fun matter is necessary if we want to instill the lessons in them. Because to teach, we first have to master, right? That means we have to know what we’re talking about, we have to follow through with our lessons, and we have to practice what we preach.
Our son has always been a good saver. I was very impressed when he saved enough of his own money to purchase a Lego Mindstorms robotics set some years back. The cost was around $230. And that was only about a third of his savings at the time. As per your #6 tip, I made sure to praise our son for his ability to save and buy something “big” from which he has gotten a lot of enjoyment as well as learned a bit about robotics and Labview coding.
The way my parents taught me financial responsibility was pretty awesome. My parents never gave me an allowance, so they basically paid for everything. However, whenever I wanted to buy something, my parents would always say “no imagine what else you can buy if you saved your money instead of splurging it”.
This is actually pretty helpful for me. My son is too young to start learning about money, but I’ve already been thinking about how I’m going to approach this. Hopefully by the time he’s really aware of money, both his parents will be fully pretired and we’ll be a good example for him.
I’ll have to have a go using these rules. Thing is though, we have a somewhat different problem. Our son saves to the extent to which he won’t spend any of his pocket money expecting that we’ll pay for the stuff the pocket money was to pay for anyway. Have you thought about teaching children how to spend? I’ve been thinking this may be more important than teaching them how to save.
I have an 11 year old boy from Big Brothers Big Sisters that I am trying to teach how to budget. I’ve set a $20 budget for each week, and then we save anything we didn’t spend for a fund for a bigger, more fun event that costs more than our $20 budget.
My daughter is definitely hooked on saving! She loves watching the balance on her college fund grow even though she has no concept of how much money it really is =)
I started investing at age 10 and began saving even earlier (obviously). I think the trick is to treat the kids like adults. Don’t give them the impression that they don’t need to pay attention to money until they get out into “the real world”. Explain to them that money can impact their lives even if they are just kids. I don’t suggest making them pay rent or anything ridiculous like that. Just show them that money enhances a persons life, no matter what their age.
My kids love saving and taking responsibility over spending money. On my birthday, they were able to buy out of their savings me a present. It was a priceless experience knowing they’ve learned the value of money.
My kid loves savings! When she sees that the coin bank is half empty, it encourages her to save more! With the right encouragement and support, I believe she would be a good saver in the future.