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August 13, 2011 | in Nanny Jobs
10 Ways to Teach Kids to Save Money
August 13, 2011 | in Nanny Jobs
I grew up in the 80’s and was part of the “Me” generation so I didn’t do a lot of saving. Spending and buying fun things that I wanted was more on my mind. Today’s generation of kids are actually saving more because the “Me” generation is trying to prevent them from making the same mistakes we made. Check out 10 ways to teach kids to save money.
- Set a good example: The best thing you can do for your children is to let them see you saving money. If you clip coupons let them help. If you buy things on sale, talk about it with your children. Kids learn a lot by watching their parents. It doesn’t work so well to tell them to do what I say, not what I do.
- www.threejars.com: This is an online service that allows the parents to determine how much of an allowance to give their kids depending on the chores that they are expected to do. It’s important to make the point that money must be earned. Then the child can determine what they are saving for and the site will even help them determine how much that item will cost and that will be their goal. The three jars are comprised of Saving, Spending and Sharing. Another thing that this generation does better than the previous generation is donating to causes. This site has a bunch of links to various charities or you can choose something like your church. The parent and child determine how much is put into each jar and how often.
- Teach kids what things cost: If you don’t buy something you have no idea how much it costs. I’m not a golfer so if someone asked me how much it would cost to get a good set of golf clubs I wouldn’t have a very good idea. This Fall when you take the kids clothes shopping give them a budget for their clothes. If you can afford it tell them the entire amount you are willing to spend on back-to-school clothes. If not, let them know that you will make a couple of trips to buy clothes and this is the budget each time. Spend time with your child looking at clothes and their price tags. Again, it’s important to let you kids see you checking the price tag. Discuss with them that they have $250 for clothes and that includes shoes. They will need to learn that if they spend $100 on the latest running shoes that they won’t have very much left for clothes. Maybe your child is good wearing jeans and T-shirts, but if that’s not what everyone else is wearing you will need to discuss choices. You see where I’m going with this.
- Explain to your child about the cost of borrowing money: Part of raising a money savvy child is to help them understand that if they save their money and then buy something it will cost them “X” amount of dollars, but if they borrow money to buy something it will cost them “X” plus “I” for interest. This is a lesson I had to learn the hard way after getting my first credit card at age 18. If you child just has to buy something right now let them know that you will loan them the money to buy whatever it is, but it will cost them interest when they pay you back. You decide what the amount of interest is, but make it somewhat close to how it would be with a credit card. Depending on the age of the child you can even get into interest over time. So now it’s not a matter of borrowing $100 and paying me back $120. It’s if you pay me back in a month it’s $120, but if you pay me back next month it’s $140 and so on.
- Needs versus Wants: Explain to your child the difference between a “need” and a “want”. Children start at a very young age saying that they “Neeeed” something. Explain to them that needs are basic and are the things that keep us alive like food, water and shelter. Wants are the extras in life that we get after our needs have been met and we can afford to pay for them. It’s important to make your child wait for the things they want. I’ve witnessed a child watch a commercial on TV and tell their grandma that they want that toy and by the end of the day she has gone out and gotten it for them. What lesson is that teaching? Not one that I want my kids learning.
- Set goals: Help your child set appropriate goals for their money. If your seven year old decides to save money for a car that might be great for a long-term goal, but you should encourage them to have short, middle and long-term goals. Saving for college is a great goal, but one that is pretty abstract for an eight year old. Using actual jars at home is a great way to visually show your child how to save their money. As the parent you can decide what percent of their money must go into savings and what percent they are allowed to spend. But be prepared, you need to let your child spend their spending money how they want, as long as it’s not hurting anyone of course. This is all part of the learning process.
- Pass along your values: You may think this is out of place in a discussion about money, but it really isn’t. If it’s your belief that 10% of your income should be tithed to the church then you need to share that belief with your child and expect them to do the same with the money they earn. Maybe they give the money to a cause that the children are working towards versus giving it to the general fund, but they need to give the money to the church in some way. It doesn’t have to be religious based either. The same goes for charity, let your child decide where their charitable donation should go. If they love animals let them donate it to the humane society or to help save the whales or whatever they are interested in. Letting them help will get them to “buy” in to the concept.
- Open a savings account: When I was growing up we had all sorts of activities that went along with opening a junior savings account. I don’t hear much about banks doing that these days, but it’s important that you open a savings account for your child. When the child saves enough money in their piggy bank or jar or whatever then let them take it to the bank and deposit it into a savings account. You can explain that once it’s in the savings account that the bank will give them money just for letting them keep their money for them. This also prevents children making rash decisions like using their money for the ice cream truck.
- Record keeping: Help your child keep track of what they are spending, saving and investing. Keeping a log of deposits and withdrawals will help them when they have to keep a checkbook sometime in the future. (That is if checkbooks still exist in the future.) It also gives them a way to keep track of what they are saving and lets them see their money grow. When their bank statement comes you can sit down with them and show them how much interest they have earned on their money. Unfortunately interest on savings isn’t what it used to be.
- Introduce your child to saving bonds: As the economy struggles and interest rates aren’t what they used to be on investments one thing has remained pretty consistent, the US savings bond. Explain to your child that they will buy the bond for half of its face value and that after a set amount of time they could cash it in for the face value. They don’t have to cash them in if they don’t want and they will continue to grow over time. This might be a good way to grow the college fund because many times income earned on bonds is tax-free if used for college.
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Growing up in the eighties myself my parents taught me the art of saving.
Although pressures such as having four children prevents me from saving now, I have installed the saving culture in my kids.
Anyway good read…..