Money Smart Kids
How to Teach Young Kids to Save
Whether your child is in preschool or middle school, we have age-appropriate tips to make saving money simple, fun and rewarding.
By Janet Bodnar, Editor, Kiplinger's Personal Finance
May 28, 2008
Any suggestions on the best ways to teach young kids to save money?
My top six suggestions: Start early. Start small. Keep it simple. Make it fun. Set a goal. And reward your children's efforts. Here's practical advice on how to do all those things as your children grow:
Preschool through primary:
The piggy-bank years
Kids this age think about money in very concrete terms, so make saving as hands-on as possible.
Piggy banks are great as both teaching tools and fun toys. Nowadays they come in all sizes and shapes, from traditional pigs to soccer balls to talking ATMs. For banks with a twist, especially for children in primary grades, take at look at www.moonjar.com; www.msgen.com; www.prosperity4kids.com, or www.sharesavespend.com.
And for a fun lesson in saving, read It's a Habit, Sammy Rabbit! or listen to the book's companion CD (www.itsahabit.com).
Remember that kids this age don't have a long time frame. So saving for college, though a worthy goal, isn't always a realistic one when a week might as well be a lifetime.
But they can certainly save their birthday money for a trip to the dollar store, or tape a picture of their coveted item to their piggy bank so they don't lose sight of their goal.
Elementary through middle school:
The allowance years
Kids this age have a more mature understanding of money. They know what it can buy and can plan farther into the future.
So they're prime candidates for getting an allowance. And requiring them to pay for certain purchases -- collectibles, entertainment, trips to the mall -- gives them an automatic incentive to save.
They can also divvy up their allowance into pockets of money for spending, saving, giving and even investing (like the piggy banks mentioned above).
If you don't want to take the trouble to parcel out your kids' allowance into pots, a simple alternative is to require them to save, say, a flat 10%.
Around age 8, kids are old enough to have a real bank account. But be careful to explain how the system works. Even at this age, banks can be a mystery to children, who are often horrified to see their money disappear.
For a good online introduction to saving, try KidsSave, a program that includes interactive tools that let youngsters set goals, track their progress and see how their money can grow over time ($29.95 with a 35-day free trial).
And you can always encourage kids to save by matching what they put aside -- your very own family 401(k).
Once your children have achieved their goal, let them spend the money and enjoy the payoff for their efforts. Saving may be spinach and spending dessert, but as my son once told me, "Saving can be dessert, too, if you save for something you want."
NEXT WEEK: Getting teens to save -- without nagging.
Reader Comments (3)
Posted by: DaveHem at 05/28/2008 12:20:38 PM
How about teaching kids not to do impulse buying? People mostly don't like whatever they impulse bought by paying full price...Instead everyone could save a lot by holding off the urge and allowing bargain tracking websites...to show us a deal on the item before buying.
Posted by: Oregon mom at 05/28/2008 01:53:21 PM
The best real-world personal finance lesson we've taught our kids is to NOT give them an allowance. They are all terrific savers and bargain shoppers. We do give them opportunities to earn money by "applying" for jobs (in addition to regular chores) around the house. For example, our oldest is now our "hired" lawn mower, and he knows he can lose his "job" if he doesn't do it well or fails to show up regularly for work. When kids have to actually earn their money, they learn its value very quickly.
Posted by: S.Clark at 11/14/2009 04:33:46 AM
Couldnt agree more, these are great suggestions. As a single parent that was *less* than good with money throughout my youth, teaching children about money is CRUCIAL, in my mind. Im not going to blame parents, schools, etc, but quite simply, I clearly didn't get it, and I am still paying for those mistakes a decade later! And quite frankly, I hate the position I got myself in, everytime I pay off my past debts I could have used my time/money sooooo much better. A program was suggested to me by a friend, that teaches kids to be responsible with money, and puts them in control of their money. Its a fun, interactive booklet + personal website that makes tracking their money fun more importantly, the tugs on the pantleg going through the grocery checkout and the tantrums have all but disappeared! I guess thats a little self centered of me but any parent knows those situations all to well. For the record, I too used to do this to my parents, I was apparently horrible to bring into a store oops! If anyone is interested, the program is designed by KidsWealth: www.kidswealth.com (hope its OK to post URL, I put it in my comment description to). Just my .02c (no pun intended) !!