According to Dara Duguay, director of Citi’s Office of Financial Education and Personal Finance and author of Please Send Money! A Financial Survival Guide for Young Adults on Their Own, it’s never too young to start teaching your child about money management.
In fact, she advises start teaching them as soon as they start asking you for money which, not surprisingly, is usually at quite a young age. “The sooner children can start learning about money, the better. If they adopt habits like regular savings at an early age, the chance that they will keep up this behavior throughout their lives is greatly increased.”
Here are twelve tips to teach your kids how to save:
Get a piggy bank
Better yet, get three. Duguay recommends having one for money to spend, one for money to save and the other for money to share (charity). “This teaches that there are three things you can do with your money.”
Take them grocery shopping
Laura Rowley, contributor to Disney Family.com and author of Money and Happiness: The Guide to Living the Good Life, says a trip to the supermarket does a family good. “Parents should lead by example and take the time to involve their children in grocery shopping so they can understand the importance of price comparison and savings.”
“Parents should not be a human ATM machine,” says Rowley. In fact, one particular way to teach them how to save is to not constantly dole out money. “Do not cave and offer them more money if they blow all of their allowance on candy in the first couple of days. Learning that there is a limit to money is a valuable lesson for children.”
Create a toy swap
When your kids are tired with playing with certain toys, why not have them swap them with their friends’ toys? This way they’re like new but you don’t actually have to purchase them.
By teaching your child how to save you’re intrinsically teaching them how to spend. She recommends agreeing to pay half if they want something expensive. “They must chip in the other half from their savings,” she says.
Be a good role model
You wouldn’t smoke a cigarette in front of your child if you wanted to instill good health habits, would you? The same applies to money. Be a good role model, take them to the bank to deposit money with you and be a prudent money manager you hope they will become someday.
Pay them an allowance
Rowley explains, “Establish a set allowance for your children and stick to it. Do not cave and offer them more money if they blow all of their allowance on candy in the first couple of days. Learning that there is a limit to money is a valuable lesson for children.”
By incorporating a mindset of sending, it’s important to have goals. One way to accomplish this is to cut out a photo of something they want to purchase. Her advice? “Attach an envelope to the photo and have them put money weekly into the envelope until they have enough to purchase the item. The photo allows them to visualize the item and make savings easier.
Match their savings
Another way to promote saving is to agree to match their savings on a weekly basis that they have made similar to the concept of an employer matching an employee’s retirement fund contribution.
Open a bank account
Better yet, once they open an account, teach them the beauty of getting monthly statements or even viewing their bank account online to see their money in a safe place.
Talk about money
Often times the topic of money is taboo around the dinner table but doesn’t have to be. Talk to your kids about how much they’re saving and what they’re saving up for whether it’s a new DVD or video game.
“Talk about the magic of compounding interest,” suggests Rowley. She, too, advises matching their savings. Also, it’s important to teach them how checks and credit cards make shopping convenient but of course you need to have cash in the bank to pay them off.
Don’t miss the rest of the Mom in Charge series:
Mom in charge: Part I, 6 Ways to take control of your family’s expenses
Mom in charge: Part II, 5 Things you must know to survive a recession
Mom in charge: Part III, 10 Tips from the experts on spending & saving
Mom in charge: Part IV, 25 Ways to cut living costs
Mom in charge: Part V, The 5 rules of saving: When, where & how