MONEY-SMART KIDS


Encouraging Kids to Save

Janet Bodnar

You know that saving money is a worthy goal, but how can you get a child excited about doing it? Try these tips to teach young kids and teens the value of a penny saved.



I have three grandchildren whom I care for much of the time. I have been able to get my oldest granddaughter, who is now 13, to start a savings account. She gets money on special occasions and birthdays, but is very reluctant to put any into savings. I offered to match what she put in and that helped a little, but that's not what I would like the incentive to be. I want her and her sister, 10, and brother, 7, to get enthusiastic about improving their lives. Please help me get their attention, and thanks so much for your great articles.

Relax, Grandpa. Your grandchildren, especially the 10- and 7-year-olds, are a little young to look at the big picture, as in the rest of their lives. For them, even a few weeks is a lifetime.

One way to encourage them to save is to give them a goal, preferably one they can accomplish in a manageable amount of time. For the younger children that could be a coveted toy, a jersey from their favorite team, a new baseball glove, even an outing with Gramps. For the 13-year-old, it could be a new computer or a school trip.

Having kids save for their own iPod (instead of buying it for them) is a great way to teach them that putting aside small amounts of money now can pay off in big rewards later (as a bonus, they'll also pick up shopping skills along the way). And they'll certainly have a greater appreciation for your matching contributions.

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Once kids are teenagers –- your 13-year-old granddaughter is probably ready for this -- you can expand on those early lessons and hit them with the best trick in the book: the magic of compound interest. More than any other lesson, using a calculator to show how fast money grows seems to make a big impression on teenagers and young adults (go to the savings calculator on Kiplinger.com or the Saving Rocks page at OrangeKids.com).

I know of one 11-year-old who took the $500 he earned from mowing lawns and, with the help of his mother, opened a Roth IRA. Assuming an average annual return of 7%, that $500 alone would be worth nearly $25,000 when he's ready to retire. Numbers like that are sure-fire attention-getters.




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