Teaching Kids to Save Money
As your child’s excitement dwindles down from the Holidays, they may be losing interest in the many gifts they’ve received, and be eager to spend some of the Holiday cash they’ve been gifted. Your Local Kids, your local parent resources guide of Long Island has some helpful tips for you to assist your kids in the start of making good lifelong financial decisions.
- Set a Good Example
Most kids will mimic the behavior that they observe; so setting a good example financially is crucial. Take them shopping with you and allow them to read price tags. Comparison-shopping can be taught early on if you help children identify items that are similar, and then have them differentiate between the brands. Even very young children can grasp the concept of basic marketing. A good trick is to have them look for brands or items that they recognize, and then similar items or brands that may cost less.
- Establish Separate Banks
Even very young children will appreciate dropping coins into a piggy bank. When children are old enough to understand the monetary value of each coin or dollar bill, have them set up three different banks. A good idea is to use three different jars or piggy banks, each one with a picture of what they are saving for. One should be designated a short-term goal (perhaps a toy or book they want), one for charity (having your child select the cause they would like to contribute to encourages an interest in contributing), and one for a long-term goal (such as a family vacation, car, or college). A good idea is to save along with your child, either by establishing your own bank, or matching their contributions. If your child is choosing to save for something such as a family vacation, encourage the rest of the family to help them along. If they see other family members saving, it will remind them of their ultimate goal, and keep them from getting discouraged.
- Encourage Healthy Spending
Spending is an important part of saving money, and it’s a good idea to help your child understand when it’s a good time to spend. If your child has reached their target goal for a particular item, have them choose two others that match the cost before they go through with the purchase. This practice allows them to understand that they have options, and encourages financial discretion. You can also point out a similar item that costs a bit more, and assist them in determining how much longer they would need to save to afford it. Another helpful tip is to establish a savings chart, so that they are able to physically see how close they are to reaching their goals.
However you choose to encourage your child in saving money, try and remember not to indulge too much or spoil them. It will be much more rewarding for them to see their hard efforts pay off, and they will appreciate the lesson carrying on to adulthood.