Saving money is a habit that is not only crucial, but can be beneficial to learn at a young age. Many people were never taught effective ways to save money when they were younger, which in turn creates adults with little to no savings strategies.
A 2021 survey discovered that nearly 54% of Americans were living paycheck to paycheck, and in 2023, the number is even higher. Because those people are living paycheck to paycheck, many of them have no savings for the future.
There are many reasons why people fall into financial hardships, and it cannot be blamed solely on financial illiteracy as a child. Nonetheless, it is important to establish good money habits with children to help them create a savings mindset and create habits that can last them a lifetime. Here are 8 ways to start that journey together.
1. Talk About Money
A recent survey was conducted to see how many parents discussed money with their children. It was found that nearly 43% of parents surveyed did not discuss money with their children, citing the reason as embarrassment.
Unfortunately, this embarrassment can often cause children to not have a firm grasp on finances later down the road, which can lead to financial hardships. If this sounds like you, then you can help to break the cycle by discussing money matters with your children.
It does not have to be a deep discussion, or even a full disclosure of your situation. Money talks can be as generic and frequent as talking about sports, the weather, or school with your children.
Depending on the age of your child, you may want to discuss such topics as why it is important to save, what money actually is, and how helpful it can be to the quality of one’s lifestyle.
2. Set a Good Example
It was found in a T.Rowe Price survey that 40% of American parents had no form of savings or emergency funds.
One of the best ways to teach a child is by setting a good example. A fantastic way to set an example is by having the whole family become invested in saving money.
Many parents use this as an opportunity to teach about delayed gratification. Talk about saving for something that will benefit the entire family, such as saving up to get a pool or a new TV. Children may love to get behind this, as they can physically see the money going towards something they want and that they helped to purchase.
3. Wants Versus Needs Discussion
One of the most important things to teach a child about saving is the difference between wants and needs.
Wants are extra things that do not particularly contribute to the basic needs of the house or you. Needs are the basics like food, water, clothing, school, and healthcare.
Many people find quizzing their kids with their own household items about what is a want or a need to be a fun and educational game kids enjoy. Doing this also allows the parent to explain the concept of prioritizing money expenditures, which includes saving some of the money for future expenses.
Nearly two thirds of all parents in the United States give their children some form of allowance. This can be a helpful tool to get children to learn about saving and the value of money.
By allowing them to make their own money based on chores, they get to experience the value of their hard efforts and gives them a chance to learn how money works in a safe environment.
5. Piggy Banks and You
Almost everyone, at one point in time, has had some form of money cache. For kids, these usually take the form of a piggy bank.
When your child has a savings goal in mind it is a good idea to get them a piggy bank to safely keep their savings. Not only does this help younger children learn to save money, but they also have a blast breaking the bank open.
For older children who may not be interested in a cutesy piggy bank, a savings account or kid-centric debit card may work just as well. The card and the account also allow the child to track and see growth in their savings. The child friendly debit cards also send alerts to your phone so you can track what they are spending their money on.
6. Savings Goals
Many children struggle with the concept of saving because they are impatient. So, what many parents have discovered is that it helps to set a goal the child can save up for like a game or an outing somewhere. This shows children that there is a point in waiting and saving money.
A fantastic example is if your child wants a new bicycle. You could sit down and him or her plan out how long it will take to save up with the amount of allowance received each week.
Then, set a goal based on this rate. If it is a larger or more expensive item some parents will go in half of the purchase to help make the goal attainable.
7. Mistakes Happen
Children, like everyone, learn from mistakes. Part of learning how to deal with money is losing money.
It may be very difficult to stay out of the way and let your child make some mistakes with their money. However, ultimately, it can be better for the child in the long run.
This does not mean turning a blind eye to your child’s money spending habits, but to simply let the mistake happen. A good example would be losing money because it was not put in a safe place, spending money early and not being able to buy what was actually wanted.
8. Be Their First Creditor
“Do not live beyond your own means” is a wise saying and one many people take on as a tenet of saving. Many children become impatient with the waiting aspect of saving for something.
Parents can become their child’s creditor by lending them the money with interest to be paid back at a later date. This not only shows the importance of weighing your financial options, but can also teach that taking charge of saving your own money is often cheaper than borrowing money in the long run.
By Larissa Shelton –