Your seven-year-old desperately wants a hot new video game. Your 12-year-old keeps asking for the latest Selena Gomez CD. Your 17-year-old says everyone else has an iPhone. Being a parent can be one of the most financially taxing situations you'll ever encounter. But financial and parenting experts agree that just giving your kids everything they ask for is more than expensive, it's unwise.
A better approach is to teach your children about the value of money and how to save up for the things they want. Not only will they learn the importance of saving money for the future, they'll also build their self-control, which will pay dividends in all aspects of their lives.
Be a Saver, Raise a Saver
The first step to raising a money-savvy child is to model the behavior you want your kids to follow. Make a budget and explain the general idea of budgeting to your kids so they understand the need to balance the money that comes in and the money that goes out.
Develop a savings plan for yourself and stick with it. Make the value of savings concrete for your kids by explaining what you're saving for, for example so you have money on hand if unexpected expenses arise or for the family vacation or holidays.
Age-Appropriate Strategies Help Kids Save
For all ages, the first step is to help kids understand the difference between wants. Next, set a savings goal. A short-term goal, like saving $5 for a toy, will work for younger kids. Tweens and teens can handle a longer-term goal, like saving for a new computer or a car.
For pre-school through elementary school-aged children:
- Make savings a hands-on experience by having them put some of their money in a piggy bank or jar. Tape a picture of what they're saving for on the container to help them remember their goal.
- As a simple way of teaching budgeting, have your children divide their money into three containers-savings, spending money, and sharing money to give to charity.
- Make a chart so they can track the progress towards their savings goal.
- Take your children to the bank and help them open a savings account. Many banks offer no-fee, no minimum balance accounts for kids.
- Have them make regular deposits when they get their allowance. Also urge them to save a portion of any money they get as gifts.
- If your children work, encourage direct deposit of their paychecks with a portion transferred to savings each payday.
- Help them shop around for the savings account with the best interest rate to maximize savings or consider putting long-term savings in a CD.
- Incentivize the savings habit. Consider matching a portion of their savings or adding a small amount of "bonus" money to their account when they reach a savings goal.
A Strong Foundation for Their Financial Future
By teaching your children how to save and budget for the things they want, you'll give them the skills and discipline they need for a more secure financial future. And it can also help make you more mindful of your saving and spending habits!