We teach children virtually everything with the concept of positively shaping who they will become as adults. The concepts of kindness, charity, honesty, and hard work are all ingrained in children with the hope that they will become part of their personality. The habit of saving money is no different. Teaching students the habit of setting money aside into savings from a very young age is very important. Discover notes that children as young as five years old can begin to learn these lessons. As they get to an age when they are in more control of their personal finances, it will be more likely that they will continue the habit of saving and thus being more financially secure as adults. Here are some of the best ways to teach your kids how to save money:
Put the "Fun" in Fundamentals
The foundations of saving are the best place to start. Opening a savings account for your child should be made into a big deal. Make it a special day where they are part of the process. Customer service representatives at the bank are almost always happy to help make it a big deal for your child. Once you've opened the account, put together a saving plan with your child. They need to be part of the plan and commit to how much they will save when they get money from holidays, birthdays, allowance, etc. Starting with the commitment to save is the most important first step.
Different Types of Saving
Explaining to children about the different types of savings is important once they are a little older. Discussing the percentage of income put into the savings account just for a "rainy day" is important, but it should be noted that rainy day saving (also known as an emergency fund) is different from targeted saving. Having a goal in mind and saving for that goal is a totally separate financial habit to begin instilling in children from a young age. If a child wants to purchase a new bicycle, you have the opportunity to research the bike they want and the cost. You can also project how long it will take them to save the money based upon how much they want to set aside. Not only does this teach kids how to save money, but it is also helpful in teaching children the concept of patience.
Show Kids the Money
Every now and then, take the time to show your child their bank balance. When the monthly statement shows up in the mail or through email, open it up and show your child the accounting of "their money." This reinforces that their money is safe and sound and is growing because of their good habits. When kids get excited about saving, they will also look for more ways to earn money. Saving change in a piggy bank or doing extra chores instills a sense of hard work in children. If they are having fun while they are learning solid financial lessons, you have slipped the medicine in with the applesauce.
Set a Good Example
The best way to show your children how to save money is simply to set a good example. Parents are the first and best teacher for children. With this fundamental concept in mind, saving money can and should be modeled for children. They will be more likely to follow the patterns their parents set, so make sure you are modeling good saving habits as well. You can make it a bonding activity, where you both go make deposits into your savings accounts together. Make sure you continue to talk about putting money into savings with a sense of urgency as if it is a requirement. Children will pick up on that sense of urgency and they will soon be asking about going to the bank to put money into savings. Be positive and encouraging to them, praising their good habits.