To teach your kids the value of saving, first, explain the differences between needs and wants: food and shelter are necessities, while video games and family vacations are extras. Some parents choose to keep their income and budget private, but children can benefit from knowing how their household earns and uses its money. Adults save for a variety of reasons - including building an emergency fund, planning for retirement, or purchasing a new car - and it can be helpful for your children to know and understand your short-term and long-term savings goals.
Should your children receive a few green bills over the holiday season, there are several approaches you can take to demonstrate the power and importance of savings:
Set savings goals. Simply telling a child to save their money could have the same impact as telling them to clean their room: in one ear and out the other. But giving your child a reason to save can provide the motivation they need to get started. If your daughter wants to buy a new Frozen II costume that costs $35 and she received $20 from her grandpa at Christmas, you can explain to her that she will need to stash it and save the next two weeks of her allowance, for example, to earn the rest of the dollars she needs to make her purchase. Providing smaller, more manageable goals will help your kids understand the impact of big-picture savings.
Provide a place to store savings. Older children should open a savings account at the credit union, while younger children can benefit from saving right at home. Let your elder children be involved in the process of opening the account, and frequently check their account balance with them to show them their progress. Younger kids can use a clear jar - rather than a cutesy piggy bank, which is fun but doesn’t provide a distinct visual - to watch, say, two dollars and twenty-five cents turn in to five dollars and fifteen cents.
Offer savings incentives. If your kiddos aren’t exactly buying into the value of saving their money, try introducing an incentive to help them out. You could offer to match a percentage of their savings over a certain period of time or give a monetary bonus once they reach a certain savings milestone.
Lead by example. Want your children to be savers? Be one yourself! Whether you increase your 401(k) contributions or open a high-yield savings account, prioritizing saving will encourage your children to do the same. Additionally, you could decide to save for something as a family, whether it’s a trip to the slopes or a new flat-screen TV for the basement theater.
Making savings a regular part of your child's routine can help them become financially secure in adulthood. You teach them to brush their teeth, write thank-you notes, and respect their elders - educating them about the benefits of saving money is just as important, and the holidays are a great time to start.
