It’s Time To Teach Your Kids About Saving Money

July 14, 2009 – 7:27 am

Okay, Mom, you’ve been practicing all the things you’ve been learning about saving money.  You live a frugal lifestyle and you live within your means.  These two things have helped you build a savings plan.  You are able to save for large purchases and you have developed a savings plan for the future, which hopefully involves some investments.  That is all great, but have you taken your kids along on this learning experience?

Kids of all ages need to learn how to save money.  Instant gratification and a world wide shopping addiction are certainly two notions that have not helped your child’s money saving habits.  But, you are here to lend a gentle, guiding hand toward creating a real money saving lesson for your child.

Beginning with a child of tender years, you can easily encourage your young child to start a “penny jar” as early as age 2 or 3, as soon as they quit putting those pennies in their mouth!  Show your young child what a few pennies will buy, then show your child what a handful of pennies will buy, and then, for the grand finale, get a whole big jar full of pennies and show what that will buy.  Even a very young child will get the idea, and hopefully will want to fill up that penny jar.  Be ready to hand over your loose change!  Most kids love this little savings plan.

Children of elementary school age can certainly understand and appreciate a savings account at a bank.  Keeping a little bank book and watching their balance grow is a good way to learn that “a penny saved is a penny earned.”  When they see that magical interest show up on their bank statement, they’ll finally understand that old saying.  This age child will most likely want to save for a big purchase, like a game or larger toy of some sort.  The savings account may get cleaned out for relatively small purchases a couple times before your child realizes how unrewarding that was compared to watching the balance grow and purchasing something really big!

Once a child is in the higher grades, he or she may have a part-time job or get some sort of allowance for doing chores around the house.  This older child should have the future in mind.  The savings plan that a teenager sets up should include some sort of long term goal.  The first thing that comes to mind for most teenagers is a car.  That may or may not be reasonable in your family, so be prepared for a discussion.  A very important long term goal to consider is college or other further education.  Saving for an education is very often not a choice, it’s a necessity.  Of course, there are grants, loans, and scholarships to consider, but they should not be relied upon as your child’s only source of money for school.

Beyond saving money, an older child should consider safely investing their savings.  Along with your child and a financial adviser,  look into investing in bonds and mutual funds.  In addition, the federal government, and some states, offer programs in which they will chip in money to a student’s investment plan and even offer tax breaks to either the student or the parents.  Don’t forget to consult with your own child’s school counselor for ideas about where to go to find out about these options.

Living a frugal lifestyle involves a lot more work than many people think.  It takes a great deal of planning and research to find out how to save money and invest money wisely.  You’ve done the hard work and learned how to make your money work for you, now help your child do the same!

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