There are many different lessons we need to teach our children as they grow older. Teaching them how to save money is a huge skillset that will help them throughout adulthood. It can be a hard lesson to learn as a child, however, impulsivity is a staple of childhood. Trying to curb the impulse to spend for immediate gratification can take time. Here are some great tips to help teach your child to save money.
Teach the Difference Between Wants and Needs
Explaining to your children the difference between wants and needs is key. Explain the basic needs they’ll need throughout their lives. Basics such as food, shelter, clothing, then extras are wants. They do not NEED a TV or NEED an Xbox. Those WANTS can come when their budget allows it. That may mean they need to take time to save for those items, so they don’t harm their ability to pay for the NEEDs first.
Let them Earn Their Own Money
Teaching your child that money comes with work. This could be chores and your children earn an allowance or this could be you helping them start their own business. Perhaps they sell their own drawings, run a lemonade stand, sew stuffed animals for sale, etc. Taking ownership in the task will help them feel accomplished and successful as they make a sale, earn money, and save for their wanted item.
Provide a Place to Save
Either get your child a piggy bank or an actual bank account. As they’re older I recommend the bank account. It’s also important to teach your child to track their account balance, write checks, balance their account, and make sure they do not overspend. Using debit cards can be so quick, it’s easy to overspend without tracking your balance. Teach them about overdrafting an account and how that can cost them money in fees.
Leave Room for Mistakes
It can be easy to want to steer your child away from an error in spending. Perhaps they want to buy a toy you know won’t last long or you see the lack of value in their purchase. Depending on the circumstances, let your child make the decision, despite the foreseeable mistake and help them learn from it.
Give them the opportunity to buy the items themselves.
Once they’ve saved for their wanted item, help them count out the money they need, go to the store with them, pick out the item, and help them hand their cash over to the cashier. Do the whole process and explain the difference in money they now have after spending.
Lead by Example
Do what you can to show yourself saving money. Do not just buy expensive items on a whim. Save for them yourself and explain to your children what you’re doing and why.
Avoid the Open Wallet Policy
Do not just give them money whenever they ask for it. Ask reasons, understand the want or need, and discuss with them saving for them when necessary.
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We need to start working on this with our 5 year old. I love that you shared so many actionable ideas! Definitely writing some of these down to get started with! Thanks!
This is great advice. We are working on giving our kids more responsibility with money.
Great tips! Leave room for mistakes is so important. It’s probably one of the hardest things to do because our instinct always compels us to protect. But, it’s so important we let our kids make their own choices. They gain confidence and sometimes they learn and grow from them.