Teaching Your Child to Save Money

February 01, 2011, By Victor Medina 3 comments

Kids don't really like to save money. They want the things that money buys more than the good feeling of future financial security. I mean, come on, how can putting money aside compete with candy now? Think of when you were a kid and your parent's attempts to help you understand the value of a dollar. Did it work or did you envy the kids down the block who had all the cool toys money could buy? Kids just don't say, "Nice Xbox you've got there, but I'm happy saving my money in a high interest savings account."

Unfortunately, while saving money isn't fun when you're a kid, it's necessary. To get the idea of saving money to stick with your kids, it should be part of a larger lesson about the value of money and being a smart consumer. Those may be heavy subjects for a young child, but there are easy ways to put the lessons in terms they can understand.

Why We Save

Children, especially young children, don't quite grasp the concept of saving for the future. Most adults don't even see the point. A 2006 survey found that only 41% of Americans save money on a regular basis. Making sure your child learns the value of saving money may be one of the greatest lessons a father can pass down to a child.

Rather than trying to teach the idea that saving money is good, make the action of saving money part of a goal your child can achieve. As a child, whenever I asked for something non-essential that cost a little more than usual, my parents told me to save the money for it. Once that goal was set, I learned fairly quickly that I alone was responsible for reaching that goal, and I needed to save money. Putting money aside for a rainy day doesn't make sense to a kid, but, by making it goal-oriented, a child can understand that saving money is part of the path to a bigger reward.

Set a Realistic Goal

It is important to set savings goals where children can see progress. For example, if a child gets $5 or $10 a week in allowance, it's probably not the best idea to start out saving towards a video game console that costs hundreds. A more realistic goal would be a video game in the $50 range, where children can appreciate the efforts of saving after a short time. Unrealistic or far-off goals will quickly discourage a child. Once they have experience the payoff of saving, and their attitudes toward saving money mature, the savings goals can become more long-term.

For young children, whose attention spans and patience are shorter, smaller, yet easily attainable goals, will get the point across.

The Value of Hard Work

As a parent, you also have the opportunity to teach your child about the importance of doing their best and going the extra mile. Today more than ever, a little extra effort and attention to detail can get you ahead at work, and children should realize that. As a child, my parents insisted that it was never enough to just get the job done, but to do a great job.

If your child does a good job with their household chores, give them extra opportunities to earn more money. It is also a good time to reinforce the idea by telling them about times in your life when hard work created a new opportunity that paid off for you. It is important that your child realize the real-life benefits of hard work. If your child does more than is expected of them (like trimming the bushes in addition to mowing the yard), reward that with a bonus in allowance.

Making the Hard Choices

Learning the value of saving money also means learning to make proper buying decisions. That means, as the parent, you must show them that not all of their money is "disposable income." You must not make any non-essential purchases for them, and allow them to realize that spending their money on something now makes it harder to reach their goal later. That means not paying for their iTunes purchases, or buying a new baseball cap.

It's also important to know where to draw the line. Making your child pay for all of his or her fast food may be a bit harsh for young children, but for younger teens who want their independence, it may be a good idea for them to understand that sometimes a mac and cheese dinner at home is necessary.

Children will usually appreciate the fact that you are allowing them the freedom to make their own financial decisions, even if they don't admit it. When they learn to do without some things, they gain maturity.

Make Saving Money a Bonding Experience

As a parent, you can also take the opportunity to make saving money a bonding experience. Share with them how and why you save money. Let them see your paycheck stub that points out your contributions to your IRA or savings account. Encourage them when they save money, or take them to open a savings account at the bank. Showing your child that you care about their saving habits and support their good decisions will do wonders for your personal relationship with them.