Kids learn more from what we do than what we say. This is no different when it comes to money management. Modeling good money saving in your own life is the easiest way to teach kids to save money.
It seems that in our world of instant gratification, no one has to wait for anything. Patience is something that adults and children alike don’t get much practice with. You don’t have to wait for commercials on television. You can buy something and have it delivered in a day thanks to Amazon Prime. We are shocked when someone doesn’t respond immediately to our communication since email showed up on phones and text messaging became a thing.
Why in this world of instant gratification would we be shocked that kids are having a hard time learning to save money?
I want my kids to understand money management and I want them to know how to save money.
There are definitely money decisions I wish I had made differently years ago, but there are far more things that I am thankful I did know about and did wisely.
Even if you are struggling with money management yourself, you can still help your kids learn to save money and overall money management skills.
In fact, watching you learn how to save and pay down debt can be a great lesson for your kids. Our debt snowball started after we had kids and our oldest, Cassidy understands our goal on a basic level. She knows that sometimes we say no to things because we are working on paying down debt. She also knows that nearly 10 years after her dad finished law school we are paying off the money it cost for him to go.
This is and will forever be a lesson in how student loans and student loan interest can impact your life for years to come. His student loan is older than she is!
How to teach kids to save money:
Be open and honest.
Share some of your financial goals – age appropriate. I do not advocate for sharing all of your financial information with your children. This is an important part of explaining money to a child. It is okay to tell your kids they can’t have something at the store, because you don’t have extra money for it. However, you don’t want to share so much that your kids are worried that you don’t have enough money to live. In our family we talk openly about our debt snowball and how we are paying off a student loan. If you can’t afford a family vacation now, but it is a financial goal- share that information.
Share a savings goal
If you are the type of person to just buy what you want when you want it, it might be time to change that at least once and awhile. It’s great if you have the money to support this type of lifestyle, but consider what it is or is not teaching your children about saving.
For instance, I was thinking about buying a Cricut for many years. I wasn’t sure if I would use it enough to justify the expense. I spent several years debating the purchase. Then this year I researched Black Friday deals. I ended up getting a great price on it on Black Friday and I had all of the money saved before I bought it. By doing this process myself and talking about it openly, I modeled for my daughters how to save.= and the value of a dollar. Plus by being patient I was able to get a better deal on it.
Find a savings goal
In order to teach kids learn to save money, they have to have something they want bad enough to save for. Is there a toy they want that you aren’t going to buy for them? Help your children to find something they want that is a reasonable, but not quickly attainable, goal. When helping your children to decide what is reasonable take into account how they will earn money, how much they can possibly earn, and how quickly you think they need a savings “win” to stay motivated.
For instance, Cassidy who is 8, is saving for “Lego Friends Stephanie’s House. She spent a lot of time deciding what she wanted to save for. We even took a picture at Target of the item and the price so we could remember for when we created her savings chart.
Provide a way for them to earn money
To teach kids to save money they must have a way to earn money. They may receive money for birthdays or holidays, but I argue this is not the best way to teach them ongoing savings. In our house our children earn an age-appropriate paycheck weekly. The girls receive this pay for doing work around the house. They also have opportunities for extra pay throughout the week for extra jobs. For instance, there are times that I offer extra pay to Cassidy if she will serve as a mother’s helper with Amelia while I try to get some work done on a weekend.
Depending on the age of your child, have them brainstorm ways to earn money. Could they hold a lemonade stand? What about selling some of their things they don’t want anymore at a garage sale or Varage sale. This can also serve as a great way to get your child(ren) to declutter their rooms. They could offer to rake leaves for a neighbor, shovel snow, mow lawns, babysit, etc. When I have a lot of items to list on Varage Sale I offer for Cassidy to help me and I will pay her a certain amount for her help taking pictures, cleaning up things, etc.
Some people argue that kids shouldn’t be paid for doing chores in their own house, but I believe that the lessons I am teaching in money management are far more important. Plus, we don’t pay them for everything.
Create a savings goal chart
Setting a goal is great, but being able to visualize that goal is the next important step. A savings goal chart is as simple as the thermometer fundraising charts you see all the time when a not-for-profit is fundraising for some big item. After your child has determined what they are saving for and how much it costs, have them write that amount (with tax) at the top of the chart. Then create appropriate increments for the chart. If your child is in 2nd grade or above they can help with deciding those increments (hidden math lesson).
Be sure to leave the thermometer in a location that is easy for the child to see and stay motivated by. Currently Cassidy has been saving for several months for her “LegoFriends Stephanie’s House.” I won’t say I wasn’t tempted to make it one of her Christmas gifts since she has been working so hard to save for it. ***
Update the savings goal chart every time they earn money
Your child should update their savings goal chart often. This will keep them motivated. Just like when we are paying down debt or saving for something big we want we need to see we are making progress. The months that we barely tread water on our debt snowball are the most discouraging. However, when we sit back and look at the progress we have made over time we are more encouraged. Your child needs this same encouragement.
It may not always be easy or fun to teach your kids money management, but it is important. Money management is a skill and one your children need to learn early. Don’t sit back and hope they will be good managers of money, take the time to teach and model for them. If you are working your debt snowball, let them walk the journey with you. It will be a lesson they will not forget. Trust me, Cassidy is almost as excited for that debt free celebration as we are!
***Special note: It is important that you, under no circumstances, buy them the item they are saving up to purchase on their own. It can be tempting to do so because you know exactly how much they want it and how hard they have been working to save for it. However, if you buy that item for them you are taking away this valuable lesson and the great satisfaction they will receive when they make that purchase for themself.