Teaching Kids to Save Money at a Young Age
Jun 17, 2024
Teaching Kids to Save Money at a Young Age
Budgeting and money management are important in building financial stability, promoting future successes, and decreasing lifetime stress, but at what age should these skills be taught?
Research shows that teaching children about money, even those as young as 3-7 years old, equips them with the confidence, knowledge, and skills to manage their money effectively now and in the future. In addition, financial education has been linked to lower debt levels, higher savings, and higher credit scores as children mature into adulthood.
FamilyMeans Financial Solutions provides tips for teaching money management:
Set a good example:
A child’s upbringing plays a big part in shaping the relationship with money. Setting a clear example for your child(ren) to follow can be crucial in cementing the money management and saving habit at a young age.
Use a clear jar for savings:
The idea of allowing children to actually see their money “growing” can be influential in creating the habit of saving money. The visual gratification can be a driving factor in wanting to continue to save for future endeavors.
Use an allowance as a learning tool:
In the US, 79% of parents pay their child(ren) an allowance. Our counselors encourage parents to use an allowance to teach kids about money as a reward, and money management. Using an allowance to reward completing chores or putting effort into their schoolwork can teach the concept of having to do work as an adult to gain a financial reward.
You can also use an allowance to teach budgeting, putting half into savings for later while the other half can be used for spending.
Teach opportunity cost:
“Opportunity Cost” is an economic term that can simply be defined as “what you have to give up to buy what you want”. To a child, you could teach this by saying “If you buy this video game, you won’t have the money to buy that pair of shoes “or “If you spend all of the money you earn now, you won’t have as much saved up to put towards your first car in the future.”
Here are some examples of how to begin teaching your child(ren) about money management by age range:
Ages 3-5: Show them that things cost money. When checking out at a store, explain the cost of the item(s) that you are purchasing or what they want. For example, that ball costs $5, or these bananas cost $2.
Ages 6-10: Begin to teach them about budgeting. Using their savings and allowance, discuss needs, wants, and giving back. At this age, the child should consider having “buckets” for each of these categories.
Ages 11-18: Set-up a simple bank account and debit card. This will begin to prepare them for a larger account once they are older. Teach them how to manage what funds are in the account and how a debit card represents those funds.
Once your child is 18, they will likely begin to get solicited by credit card companies and student loan organizations. Be sure to educate your child on the positives and negatives of these offers.
FamilyMeans supports individuals and families with debt and credit counseling through our Financial Solutions program. If you or your family is interested in learning more about gaining control of finances and budgeting for a successful future, reach out to us! Give us a call at 651-789-4014 or visit https://www.familymeans.org/financial-solutions/