Today, April 29th, marks Teach Your Children To Save Day. Kids of all ages often ask their parents for toys, video games, M&Ms, or just plain cold-hard cash. However, they should learn in their early childhood that money does not grow on trees. It must be earned and saved in order to spend it on both “wants” and “needs.”
Check out these 10 simple methods you can use to effectively teach your kids about personal finances and saving money:
1. Pay your kids an allowance for helpful chores around the house.
If little Johnny or Krista helps out around the house by doing chores like taking out the trash or doing some light cleaning, reward your kids with a weekly allowance. Once they actually get some bills and coins in their piggybank, the concept of saving enough money to afford future purchases should enter their mind. An allowance could be as small as $20 a week.
2. Make saving a fun game.
We’ve all played the classic board game Monopoly at some point in our lives. The Game of Life and Payday are among many other popular titles that involve dealing with money. If your kids are old enough, dust off one of these board games from your closet, and schedule a family night to play a round or two. Games are fun for children, and they’re a great way to introduce them to what’s involved in making money, spending money, and saving money. There are also plenty of apps for kid-friendly tablets that mimic these board games as electronic versions. Find ways to apply these games to everyday life.
3. Provide them with colorful visuals, such as a savings chart.
Create a savings chart for your kids using construction paper, colorful markers, and stickers to make it visually appealing. Kids like looking at pictures and graphics. For example, find a sticker of a duck to put on the chart that represents a stuffed animal duck that your daughter has her eyes on. Then have her write down how much money is in her piggybank each week, and have her add up these increasing amounts to the point when she can afford the toy. This is essentially a kid-friendly version of how parents monitor their checking accounts and Roth IRAs online.
4. Give your child a reward for savings milestones.
To recognize your child for his or her money-saving efforts, consider taking them to Chuck E. Cheese’s. Such incentives can make kids work harder at saving money. You could up the ante of the reward based on how long a child goes with his or her savings milestones.
5. Monkey see, monkey do, so set a good example as a responsible parent.
Kids mimic adults in so many ways. You may not even realize it, but your child could be paying attention to how you spend your money, what you are bringing home from the store, and how much you are saving. Keep a money jar in the kitchen that you contribute to regularly, and make sure your kids understand why the big empty jar has gradually filled up over time.
6. Open up a savings account when your child is old enough.
When your sons reach adolescence, it may be the perfect time to open a savings account for them. And, don’t just open it and manage it yourself – let them be hands-on with the account so that they eventually learn how to manage it themselves. Look for high-yield accounts that offer significant interest. Teach your kids about this concept of interest.
7. Encourage your child to fantasize about the future.
Let your older kids maintain an ongoing list of items they want to own eventually. This list could include a new tablet, a Playstation 4, a car, a boat, or even a townhouse. Make sure your child prioritizes everything on this list. Setting these goals for savings can be a huge help to young people when they start working and earning income. It’s also fun for them to think about the future.
8. Take your kids shopping with you.
When your children tag along with you to department stores and the supermarket, they will learn how you spend your money. Do you use coupons when you shop? Do you use a price comparison tool to score the biggest bargains? If you shop on Amazon or eBay, show your kids how you find the best deals. You could also show them your receipt for a week’s worth of groceries so they get an idea of what ice cream and bananas cost.
9. Hire your kids in your small business.
If you’ve taken the dive into running your own coffee shop or construction company, let your kids help out in the business. Through income shifting, sole proprietors can pay each of their kids up to $6,300 (as of 2015) per year. Best of all, this money is exempt from income taxes and Social Security and Medicare taxes if your offspring are under age 18. Have your kids put away a cut of their regular earnings in a savings account. Doing so at an early age can help them when they finally get that full-time desk job.
10. Making money mistakes can teach kids a lesson.
If your daughter brings her piggybank to the store but can’t afford her favorite Barbie, that’s okay. Let your kids learn lessons about saving money and the risks of impulse buying. These might be tough lessons to learn when they’re young, but a small bump in the road can lead to smarter spenders and savers.