Money can be a tricky subject to talk about with your children. If you’re living by your shoestrings, you don’t want to panic your children and have them worry that the family might be living on the street one day. On the other hand, if you have millions, you don’t want your children to think they’re set for life and will get anything they want. The sooner you have the money conversation with your children the greater the head start they will have at understanding how and why saving money makes sense.
The Importance Of Saving Money
It’s important to start teaching your children as early as possible about the value of money, saving, and budgeting. Learning these lessons at a young age will help them to avoid the pitfalls of debt and mismanagement of money when they are adults. For your child’s emotional well-being, don’t discuss “money troubles” or expenses as being a “burden“. This can cause children to worry or have anxiety about money. Instead, present finances as a neutral topic.
Explain to your children that adults’ work to make money and describe to them how the money they make from working is spent. Count out one hundred pennies and show them how a portion of the money is spent on necessities, things like food, housing, transportation, and utilities.
Expound further on how some of the money is saved for short and long-term goals. Short-term saving goals could be certain home repairs, new roof or bathroom upgrade, refrigerator replacement, or on a weekend get-away. Long-term saving goals could be for big-ticket items such as your child’s college fund, family vacation to Hawaii, new car, or mom and dad’s retirement.
Money Doesn’t Grow On Trees
Another important aspect that you need to teach your children about money for them to understand the importance of saving, is that money doesn’t grow on trees. And what better way to teach them how to earn money than to work for it, like mom and dad have to do. Don’t just give your children money for nothing. An allowance is a popular way to teach children about the value of money. And when combined with chores to receive their allowance, it helps install a work ethic in your children as well.
Some parents hold regular “family meetings” where they discuss things that affect the entire family, such as chores/tasks and allowances. Allowing children to be apart of the decision- making process (i.e. deciding what chores need to be done and the amount of payment) helps them to learn to make good choices about finances with your loving parental guidance.
A method for teaching the purpose of an allowance is to make a chart of household tasks and the amount of money for each task will earn. After each child has completed their task they check it off the chart or put on a sticker showing they’re done. This will help you teach your children to understand the correlation between work and earning money. They can see the value of each task and what they will earn after they complete it. At the next family meeting when the funds are handout, discussions about how to budget and save money can begin.
Stop Impulse Buying Before It Begins
Once your child is earning money, it’s a good time to discuss age-appropriate spending and saving habits. Share a personal story of when you had to decide how to spend or save money. An actual spending verse saving experience and how you handled the situation will be a good example your child can follow. Don’t have any insights about how spending small amounts of money spent cost you far more than you ever imagine? Check out David Bach’s The Latte Factor.
Help your child understand they can save and have money to spend on fun and bigger things by budgeting, but if the impulse to buy everything in sight it will take longer to enjoy those bigger items. The length of goals will depend on the age of the child. Set weekly goals for younger children (under the age of seven) and longer saving goals for older children. Help them to determine an amount to save and an amount they can spend. As their role model, you can share your household budget tips.
Have your child tell you a list of items they want to buy and save for. Write it down for them. Having a physical list is a way to make those purchases a priority and seeing it as a tangible item will reinforce their need to save for the items they want. Put the list where they can see it, on the refrigerator, a bulletin board, or next to their piggy bank. Having a tangible list they can touch will be a reminder of their goals and will help them to resist the temptation to impulse buy and spend money on things, not on their list.
Ways To Save
Teach your children how to save by using a piggy bank or label a jar, an envelope, or can with the words, “SAVE” on it. Also, start a bank savings account for them. Then once a month, have them take money from their “SAVE” bucket and deposit it in their bank account. This will give you the opportunity, as they get a little older, to teach them about interest and how money can make them more money. Teaching them to save for things they want will reinforce the understanding to not spend on things that aren’t a priority.
Children can also learn about saving money by packing a lunch and taking it to school. How making meals at home and not going out to eat saves money. Rent a movie from the library and have a family movie night at home. Maybe even take a portion of the savings from not going out to the moving and give it to your child to put in their “SAVE” jar. Do some “free” activities together: play or skate in the park, play games at home; make some homemade gifts for a grandparents birthday; repair a broken item instead of buying new; use coupons when going to the grocery store; or buy a generic brand instead of a named one. Okay, maybe don’t go too crazy buying the generic stuff!
Saving Money The Fun Way
Make saving money a family game, “Who can save the most?” For more ideas about how to save money in jars check out T. Harv Eker’s JARS money management system. Eker teaches this method during his Millionaire Mind Intensive course, which is designed specifically to get you to financial freedom.
Learning about money and how to save money is an important life skill everyone needs to learn. The earlier your child learns this skill the better off they will be. Enlist the whole family to work together as a team in budging and saving money. Families are important and can support each other in reaching their savings goals. Saving money together is a great way to achieve future family goals because saving money makes sense. Speaking of books that teach children about saving money. Check out my latest adventured titled Saving Money Makes Cents where I learn how spending foolishly empties the bank, and how saving money makes cents. Get it? Marks cents – sense – hahaha!
