Anytime is the right time to teach kids the value of money. Older kids, especially, are subjected to constant media and peer pressure to keep up with the latest trends which results in most children learning to associate money with spending rather than saving. Children are watching money magically be ejected out of machines and transactions made via the internet, making it difficult to grasp the concept of where money comes from, how much you can afford to spend and how to save.
Since the days of dropping pennies into a piggy bank have come and gone, consider these 5 tips on ways to teach your children to save.
Open the conversation
Talk openly with your children about money by communicating your values and experiences. Tell them about your summer job in high school and what you, as a family would like to save for.
Explain the difference between needs and wants, and encourage them to ask you questions — but be prepared to answer them as well, even the tough ones.
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Set up the proverbial chore chart in an area where you will actually see it (in plain sight rather than on the laptop). Give your children a reasonable allowance for completing their tasks, and allow them the opportunity to earn extra pocket change for additional chores completed.
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Make it mandatory for them to save at least a portion (try 30% or $3 for every $10 earned) of their allowance each week into a savings jar. Go with them to the bank to deposit the money and, if they are old enough, teach them to check the balance online. If they are younger, put a running total of money saved somewhere near the chore chart.
Make sure your child understands that it’s a good idea to set aside at least 20 percent of their income for something more long term. While it may not be mutual funds or bonds, help your children set up a plan to save for their own goals (like maybe summer camp) and other mutual family goals like college. Not only will putting this money aside teach children to plan for the future, saving for college will also emphasize the importance of attendance and what it means financially.
>> How much allowance should kids get?
What better reward for hard earned money than actually allowing the child to purchase the items they have had their eye on. Give them guidelines on what would be acceptable to purchase, like books (OK, maybe a video game or two) and then be sure to make time to go with them to the store or monitor the purchase online. If the child never sees the fruits of their labor, the value of money will be lost.
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Set the example
Parents hear this time and time again: lead by example. Set the standard of a responsible money manager by paying bills on time, being conscious of what you spend your money on and be an active saver. You will quickly see that children mirror their parents’ personal finance habits.
Many parents are daunted by the prospect of teaching their kids about fiscal responsibility because of how aware they are of their own limitations in this area. Remember that it’s never too late to teach children (and ourselves) to save, but starting earlier will make it easier for you to impress upon them the importance of responsible money management.
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