Understanding the Value of a Dollar: How to Teach Your Kids about Saving Money
Teaching kids about the importance of saving gives them a solid financial foundation for the future
When parents are trying to save money, they often make it a goal to include the whole family in the effort. This involves teaching their kids how important it is to save. As simple as it sounds, however, this task is often challenging.
Many kids—especially young ones—don't understand the concept of paying money for products or services. So how can parents teach them to understand it and make it a family affair to save?
The following tips provide a great starting point:
- Practice what you preach.
- Come up with a jar or envelope system.
- Create a saving chart.
- Match your child's contributions.
- Talk about money.
If you've ever spent time with kids, you know that they pay more attention to what you do than to what you say. They imitate the actions of the adults around them, especially their parents. If your kids see you saving money, chances are that they will want to do the same.
Keep it visual but simple, especially for young kids. Think about keeping piggy banks in various rooms around the house, and, whenever you find loose change, put it into one of the banks. Your kids will see you doing it and will get into the same habit. By the end of the year, you may have saved enough for a fun family outing.
Label separate containers—jars, envelopes, just about any kind of container will work—to represent the different areas in which kids can allocate their money: Save, Spend, Give, and—when the child is old enough—Invest.
This will help teach them to budget their money. Help them figure out what they want to spend right now, what they really want to save for, and who they can help by giving. This type of system can lay a solid foundation for budgeting systems they'll use as adults.
Make a saving chart for every member of your family outlining how much they need to save every week to reach their savings goals. Hang them in accessible locations to keep everyone accountable and mark off weekly goals as you reach them. When the end of the year comes around, you'll have stuck to your savings system and saved a significant amount as a family.
This tip is good for kids who are a bit older. Just as many companies have programs in which they match retirement contributions, you can give your kids the same kind of bonus for saving. As he or she saves, match them penny for penny or dollar for dollar. They'll watch as their money grows and enjoy getting an extra boost from you.
The only way to really keep your kids involved in a family savings plan is to talk to them about money. Keep them in the loop at age-appropriate levels, particularly if you make any kind of financial sacrifice as a family that could lead to a financial gain, such as cutting the cable cord. This will teach them that it takes teamwork and effort to get ahead.