Teaching Kids How to Save

Guest post from Grace of Romance Never Dies:

Starting with their first experience of mass media, kids are exposed to powerful advertising, much of it aimed directly at them. Advertisers spend millions on developing effective strategies for instilling the feeling of need for their product, and children may be especially vulnerable to this. The result is that kids can very early on fall victim to the want-want-want, spend-spend-spend trap that has been set for them.

In this kind of atmosphere, how are parents to teach their children the value of saving?

Start early

Just as teaching a child to choose healthy foods starts at a very young age, helping a child learn how to save should also start early. As soon as children become aware of the process of exchanging money for items they want, they are ready to understand the basics of saving. Because very young kids live in the “now”, don’t start out with expectations of building a college savings with them — they simply can’t identify with goals that are so far-reaching.

Start with a piggy bank

Instead, start with a little piggy bank where they can see the coins they deposit. With my three kids, I taught them from an early age to save for a special toy or small outing — something that can be accomplished within a few weeks. As a result, one of my son Dylan’s favorite toys remains the Anakin Skywalker figure from Star Wars because it was the first toy he worked towards buying with his own money.

Match their savings

To spur the excitement, parents can match their savings. For every quarter the child puts into the bank, the parents also deposit one.

Kids see their savings build quickly that way. It also helps reinforce the value of saving. You are in essence rewarding them for their attempt to save money. You might tape a picture of what they are saving for next to the bank to help them stay focused on why they are saving.

Where does their money come from? Simple, with my three I keep a chart with stickers next to the fridge which they earn for keeping their toys picked up or for helping out with other little daily chores. This reward system lets them learn as they earn. Be creative and make this fun for both the kids and adults.

Open a bank account

By the time children are in third or fourth grade, they may be ready to open a bank account. It can be very disturbing to a child who is used to seeing their money accumulate in their piggy bank to have it suddenly disappear.

So, it is up to the parents to teach them how banks work. Their money is being kept some place safe; but it is still theirs!

When Dylan was ready to get started we made a point of visiting our local bank so he could see the building in which his money would be kept.

Make interest the reward

Just as you matched their funds when they were younger, you can make a plan to chip into their savings. Interest rates are so low now, it is difficult for children to see their savings build, so this extra reward for saving helps keep their focus.

Sit down and discuss with your kids what portion of their allowance should be put in their savings. Set a minimum percentage that is always devoted to their account. They can always put in more, but should be discouraged from putting in less. You may also want to set rules for withdrawals and the minimum amount kept in the account.

The older kids get, the easier it is for them to plan for a goal further in the future. By their early high school years at the latest, they should be setting their sights on college savings and it is something I will be encouraging in my brood. Statistics show that young savers are more likely to go to college, even if that isn’t what they are saving for!

How do you encourage your kids to save money?

Grace Pamer is a work from home mom and the author of Romance Never Dies, one woman’s on-going quest to keep romance alive despite modern day time pressures.

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  1. says

    I remember having a piggy bank… it was certainly motivation for my brothers and I to value the money we earned at a young age. Though many children have some kind of interaction with money through a parent’s allowance or piggy bank, I especially appreciate the unique suggestions here such as discussing interest with kids and matching their savings. Great tips!

  2. ERS says

    My son is 2 yrs old (almost)….although its not early to teach him any money skills, we give the pocket change from the week to him and ask him to drop the coins in his piggy bank and we tell him that it is his stuff. At the end of the month or 3 months, we take his piggy bank to the bank(which has his custodial account) and deposit the money there.

    I add the money I earn from my online surveys/savingstar/ebates etc along with this change

  3. M. Montplaisir says

    I was taught at an early age about responsibility with finances. I think it is important to pass along to my kids. I follow a lot of Dave Ramsey’s suggestions with giving kids commissions (money they can work for by chores) rather than an allowance. My kids 8 and 4 both have commissioned and non-commissioned chores each week. The non-comissioned are required chores because you are part of a family unit and the commissioned chores are to earn money. Both of the kids have both a kids savings account, college savings account and a give away jar in which they put their earned money towards. My 8 year old is currently consigning toys that she doesn’t play with anymore to earn her own American Girl Doll. At the store, instead of I want, want, want…I hear I want it but how much does it cost and how many chores would I have to do to earn it. Some would think this is harsh but my children are very lucky children and only grandkids on all sides. I think it is that more important to balance out their blessings with their earnings to make them self-suffient adults.

    • jess says

      Good for you for encouraging your kids to be financially responsible from the beginning. We also follow many of Dave Ramsey’s financial principles and are looking forward to beginning comissioned chores with our almost 4 year old soon!

      • Melissa says

        I love this idea! Is there a link that you can learn more info on “commissioned vs. noncommissioned” chores? Also, does anyone have any links of any sticker charts, etc., to keep track of these things? I love these ideas but my mind doesn’t work that way very well…. 😉

  4. says

    ERS – I also have a two year old and we do the exact same thing with loose change. He loves getting to put money in his piggy bank. Hope his love of saving money stays with him through life.

    I just wanted to add when I was in high school I had a part time job and part of the stipulation of letting me work was I had to put half of my check each week in the bank for college. At the time I hated this, but when I was in school I really appreciated having the money for books and stuff.

  5. says

    I have a glass jar for each of my girls (ages 2 & 3) I put $2/week in a jar for my 2 year old and $3/week for my 3 year old. I plan on increasing the amount of money I put in their according to their age. My three year old also does small chores, like picking up toys for change. She loves putting coins in her piggy bank. I think it’s smart to teach them how to save at a young age.

  6. Melissa says

    We are probably not as good at encouraging our big kids to save as some people are, but I have watched my 7 and 9 year olds change from the “spend it as soon as it touches my chubby little palm,” to kids who pick an item and save until they have enough to purchase it. So far, each child has saved enough to purchase a nintendo ds, and my daughter bought her own American girl doll and several outfits in the fall. Any Wii or DS games that my son has (except for birthday/Christmas gifts) are ones that he has saved to pay for. It is really fabulous to watch them struggle during the process when they want to buy something silly, but know that they really want whatever it is they’re saving up for. Our rule is that every time they make a purchase of any size, 10% of the cost of the item goes into savings. So, they aren’t saving a ton, but they already know that if they want something they have to add tax and 10% for savings to the total amount they need to save. They are certainly far ahead of where I was at their age!

  7. says

    Grace, you wrote some awesome points to consider. My little guy is only 18 months, but I took notes from this post and plan on using some of them when we start teaching our little guy!

    Great post!!

  8. Nicole says

    Our boys, ages 5 and almost 3, get money for doing their chores each week. Every Saturday night, we go over their chore chart for the week and reinforce what their chores are and look to see if there is a star for each chore. They each get $2.00 and they put them right in their piggy banks. We talk about what toy they want to save for and each week we talk about how they are saving their money and when they have enough, they can go buy their toy with the cash. They just bought their first toys, (after weeks of saving!) at Target over the weekend. They both paid seperately with their own money and got the change back. We have a coffee can on top of our fridge where we save our change for St. Jude each year. We count it at Christmastime and send a donation to St. Jude. I purposely made sure the boys each had a few dollars extra above and beyond the cost of the toys they wanted. When we got home, they put their “change” or few dollars left in the can for St. Jude. This way, they are saving, earning their own toys, paying for them, as well as giving at the same time. These are values we want to instill in them at a young age. My older son, when talking about the more expensive toy he wants next, said, “I don’t care how long it takes, as long as I get it in the end,” after I explained that it would take a while longer to save for that particular toy. He’s 5 and already grasping the concept of saving for what you want!

  9. Allison says

    First let me say I agree with this post. We need to teach our kids about money and savings. Especially in a world consumed with the all mighty dollar. However I do feel we need to be careful to not teach our children that money is EVERYTHING. I don’t pay for chores becuase I believe it’s apart of being in a family. Your reward is a nice clean house. My kids are aware that money doesn’t grow on trees because we don’t spend it like it does. Please understand I mean no disrespect. It’s a wonderful post and I will apply some of these things in my own home, I sometimes just worry in this save a dollar theme we are heading that we are sending our children the wrong message.

  10. says

    My daughter got a piggy bank with 4 different slots from her great grandma when she was younger. One for spending, one for saving, one for giving and one for investing. She has always put more into saving/giving then spending which we are very happy about. This makes me think I should also get one of these banks for my son. Thanks for the great tips, kids really need to know about money and how to use it wisely.

  11. Amanda says

    My boys are four and six and for about a year now, they both have had a chore chart where they mark off daily chores through the week. They get a small allowance at the end of the week tied to the number of chores they completed and they put it in their banks. During the summer, the call of the ice cream truck becomes their impetus for saving because mommy does not use her own money for the ice cream man. During cooler months, they can save for a trip to the dollar store or the dollar section at Target. We also have them give a small portion to the offering plate at church each week, and I have been so proud to see my oldest son eager to give God more than the required amount because he “loves God so much.”

  12. Jan says

    One thing that hasn’t been mentioned is talking to kids about the psychology behind marketing/ads. I started this with my son when he was 3 or 4 … we talked about how all the ads during cartoons are for sugary cereals or toys (and how all the sugary cereals are at kid eye level in the supermarket). Later, we discussed how car ads promote the “buy this big truck/SUV so you can feel powerful/masculine/etc.” line of thinking.

  13. Cassi says

    We use Dave Ramsey’s financial peace junior for both our boys 7 & 3. The 7 year old started when he was 3 and we find it very effective. There are some tasks that are simply expected because they are a part of the family and we work together but then there are other tasks that they can earn money for. They get fines for certain rules being broken (-$.25) which we explain by saying that mommy and daddy work hard for their money but if we break the rules (laws) we would get a fine and have to give up our money just like he does if he does something to put himself or his brother in danger or if he gets in trouble in school. He gets very few fines as a result. Everything is kept track of on a dry erase board that magnetically attaches to our fridge. Tasks that are completed without assistance are paid at a higher rate that tasks where he wants help (like cleaning his room). My 7 year old has saved for things both big and small and now that he has been doing this for 4 years he has a great understanding of money-he is currently saving for an ipod touch which we explained to him is a very ambitious goal-he decided to go for it any way and is now only $70 away from his goal-he is actively seeking out areas to get more cash-helping grandma and grandpa with their business, coming to work with me and asking my coworkers if they have any jobs for him on the last teacher work days of the school year. While he is uber focused on saving this has not taken away from his passion for giving or his helpfulness-he will still do things or try to help people out without expecting compensation because he knows it is a part of being a good person. He gives graciously-above the minimum on most occasions and LOVES putting his giving money to good use. He has purchased and donated toys to out local boys and girls club, purchased gifts and clothes at Christmas for needy people in the area, and constantly looks for places to donate his money-he heard a speaker at school talk about the sackpak program and came home excited to take his giving money with him to school the next day to donate. My friends often joke that he is better with money than they are.

  14. says

    glass jars, like baby food jars, make good money containers. One for long-term savings, one for short-term savings, one for church contributions. Children are very visual, and like comparing the levels in the various jars.

  15. kim c says

    I have a 14yr old and a 7yr. I need something that will teach both of them at the same time without having to split the lessons. (hopefully that makes sense) We have no idea how to decide what allowance is appropriate for each. I have looked into the Dave Ramsey stuff (we have been working through it ourselves for years and love it) BUT given that I have such a space between the kids, I feel like I am spaced between extremes. Can someone help me get started???? AAAHHH!!!

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