It’s best to get into the habit early, so one good idea to set kids up for success down the road is to teach them about the importance of saving and give them some tricks for how to do it. Getting kids to focus on something like personal finance isn’t easy, but you can set your child up for success down the road with a few helpful hints.
Start with the Value of Money
First, you need to help your kids understand the value of money to communicate why saving is essential. Begin by expanding on math basics, using counting or games to help them understand the relative concepts of having money and how it’s used. Board games can be helpful tools—even the simpler ones for younger kids. By exchanging tokens for things in the game, they begin to understand the idea of money.
Decide How to Handle Allowances
Many of us had allowances growing up, and they remain a popular way to teach kids about money. Some parents simply give their child a weekly or monthly allowance, while others prefer to tie the allowance to completing chores to demonstrate how jobs work. Others use allowances as an incentive for things like good grades or saving a certain amount. Decide how you want to structure allowances and how much you’ll give. Make the terms clear to your child – and honour them.
Begin with a time-honoured savings method for kids: the piggy bank. Of course, the stereotypical pigs are not the only choice these days. They come in all kinds of shapes and characters. Let your child pick one they like best and show them how to put coins or bills inside. Explain that the money that goes into the bank should be left there. You can even talk with your child to find out if there’s a toy or other purchase they have in mind and set a savings goal based on that.
Let Them Reap the Rewards
Keep in mind that kids have shorter attention spans and don’t have the same capacity for delayed gratification that adults have. Set a savings goal, and once they’ve met it, let them spend their money on their chosen prize. If they simply see money vanishing and never get to enjoy the results of their savings, they might see the activity as pointless and wonder why they should just spend money as soon as they get it.
Talk About Priorities
Make sure your kids understand the difference between things they want, like the newest video game release, and things they need, like food, clothing, and shelter. The goal isn’t to deprive them of things they want – hey’re kids after all – but to help them differentiate between things they must spend on and things that are optional.
Set a Good Example
Kids pay attention to what the adults in their lives do and usually try to mimic their parents – at least up to a certain age. If they see you making smart choices with your money, placing funds in a savings account, and saving up for big purchases rather than putting them on a credit card, they’ll learn that these are smart choices and see the benefits playing out right in front of them.
Money has always been a complicated subject, but teaching your kids the basics while they’re young will set them up for future success that will pay dividends in their adult lives. It might take some extra time and planning, but your kids will thank you for helping them understand the basics and importance of saving and instilling them with this valuable habit for life.