“Monkey see, monkey do”. An old cliché, but an apt one in this case. One of the best ways to teach children how to save is by example. The age of the child needs to be taken into consideration to figure out what to do. For instance, a younger child will respond to a piggy bank, something very tangible, whereas an older child can understand the idea of putting money into a savings account at the bank. In fact, a field trip to the bank for the purpose of opening an account and explaining how a bank works can be a fun activity!
Getting into the habit of talking about money and sharing how you are managing money goes a long way to teach your children. They don’t have to know the exact numbers, but getting a sense that one sets aside money now in small amounts so that it can grow into a bigger amount in the future is a good lesson to learn. This strategy of sharing can be an incentive and motivator for you as well to stay on track. The idea of delayed gratification is challenging but is an oh so important lesson to learn when young.
Setting goals is a critical part of handling money. For your next family vacation, let the kids help plan it. Teach them about creating a budget, help them work through tradeoffs of not being able to do everything they want. Once you have the total budget, work backwards to figure out how much to save weekly and monthly in order to be ready for the trip.
Lots of parents have questions about allowances. There are different schools of thought, and I encourage you to read up on the various options. The main sticking point is whether or not the allowance is tied to chores. Each family needs to decide what works best for them. Research does show that getting an allowance in some form results in better money management later in kids than just doling it out as needed.
Here is a great website that talks about money and kids at every age level. Check it out! http://moneyasyougrow.org
Have a recent college grad at home? We love to talk college students and recent graduates about getting off to a good start financially. Call for an appointment.