How to Teach Kids to Save Money

As a parent, teaching your child to manage and properly save his money is a skill that will deeply affect his ability to live as a productive, self-sufficient young adult. It can also be one of the more challenging tasks you face, as kids’ impulsive nature makes them want to spend every dollar they earn. Responsible spending and saving habits are among those that carry over for the rest of your child’s life, so instilling them early is one of the greatest gifts you can give your child.

Help Him Earn

It’s hard for your child to save money if he has no income, or to encourage him to save money that he receives as a birthday or holiday gift. In order for him to learn more about the concept of saving money, he needs to have a reliable method of earning it in the first place. Setting up a system of being paid in exchange for chores, or providing him with the opportunity to make money by completing extra tasks in addition to his daily chores are effective, but there are also a variety of ways that you can help him earn his own money. Finding the best system to suit the unique dynamic of your family may require a bit of creative thinking, but it’s the first step to helping him save and teaching him that money must be earned instead of being something that he’s simply awarded indiscriminately. 

Match His Savings

Encouraging kids to save their money rather than spend it isn’t always easy. Unless your child’s personality is one that has a natural affinity for saving, he’ll probably want to rush out and make purchases with every dollar that he earns. Establishing a system of matching the money that he saves can act as an incentive, especially if it’s paired with a contingency fee for early spending. Think of it as the kids’ version of an interest-bearing certificate of deposit!

Let Him See His Money Growing

Kids may not care much for columns and rows of numbers, but they will be encouraged to save if they can literally watch their money grow. Keeping a transparent jar for kids to fill with money as they save it provides a visual incentive, and he can watch his efforts literally pay off. When the jar fills, depositing the money into his very own savings account can strip away the temptation to make frivolous purchases with all of the cash he’s accrued.

Set Goals

Rather than making big purchases for your kids, encourage them to save up to make those purchases themselves. Gifting an expensive video game console or an electronic gadget for holidays or birthdays might earn his excitement and effusive praise, but encouraging him to set a savings goal and helping him to reach it will help instill a sense of accomplishment and pride in his ability to provide for his own material wants, along with a lesson on the concept of saving.

Keep Your Own Piggy Bank

Maintaining your own saving habits in a way that’s visible to your child and explaining what you’re doing can be one of the most effective ways of passing along the skill of saving money. Kids aren’t known for always doing what their parents say, but they do observe the adults in their lives incessantly and often mimic the behavior they see. Modeling strong savings habits and limiting impulse purchases will not only help you to save money in the long run, but also to encourage those values in your child.

Let Him Make Mistakes

Though it may be your natural instinct to do whatever you can to protect your child from disappointment and to head him off from making a mistake, sometimes mistakes are the best lessons. Allowing your child to spend money that he was saving for a specific goal unwisely will disappoint him when he realizes the setback, but he will learn the natural consequences of overspending. Also, resist the temptation to replace the money for him so that he fully understands the nature of the lesson he’s learned. When he’s forced to rebuild his cache of money from the ground up, he’s more likely to think twice before spending irresponsibly in the future.

Remember that the process of teaching your child financial responsibility and the importance of saving is just that: a process. It may take years for him to understand the implications fully, but it will be well worth the effort for both of you.

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