How to Teach Your Children the Life Skill of Saving Money

The average American child receives around $780 per year as an allowance. Even though that might not sound like a lot to an adult, it is a hefty amount to a child.

With American children earning a decent wage, it might be a smart move for parents to instill good habits early. After all, children are like sponges, what you teach them now will benefit them as they mature.

Here are 7 tips on how to teach your children the life skill of saving money. Let's dive right in.

1.      Talk About Money

The easiest way to start teaching your child about saving money is simply talking about money in their presence. Too many parents make the mistake of refusing to talk about finances in front of their child to not put too much pressure on their back.

Although you certainly shouldn't be overburdening your child with your own financial problems, it is an excellent idea to talk to your children about general topics like budgeting, credit, and saving money. The simple act of comparing the prices of two products at a grocery store can go a long way.

Even beyond simple money talk, feel free to discuss more sensitive financial matters with your child. Saving for your retirement, your salary, and how much it costs to go on vacation are all great things to talk about with your child, no matter their age.

The younger the child is, the less they will understand. That's OK. Talking about money gets them used to the idea that they need to be responsible and mature about the topic. As they get older, they will start to understand more and ask critical questions.

2.      Talk About Wants vs. Needs

Another really simple way to teach your child about saving money is to talk about the difference between wants and needs. Although this seems like a pretty straightforward task, adults struggle with knowing the difference between what they want and what they need.

Whenever you go to the store with your child, talk to them about what is necessary on your grocery list versus what is a want. Pointing out everyday items that are wants will get them used to the idea that they don't need as much as they might think.

Additionally, talk to them about needs and wants in their shopping habits. If they have a little bit of money to spend, discuss what they think they need and why they need it.

As your child gets older, don't drop this discussion. As we already said, distinguishing between wants and needs doesn't get easier with age. 

3.      Make Them Earn Their Allowance

In the introduction, we mentioned that kids get quite a bit of an allowance. Instead of just giving your children money, make them work for it by paying them for age-appropriate chores. 

Only paying them when they do their chores teaches them the value of hard-earned money. Read more below:

https://www.getorganizedwizard.com/blog/2018/06/dividing-household-chores-family/

If you give your child an allowance without having them do any work in return, they will have a better chance of growing up thinking they are entitled to money. Entitlement towards money is the opposite of a healthy approach to the topic.

The older your child gets, start making the chores more difficult and increase the amount of their allowance. If they're old enough, you could even consider letting them get a job.

4.      Give Them Somewhere to Save Their Money

Once children start trying to save their money, they need someplace to save it. For a young child, a piggy bank should be enough. 

As your child grows, consider opening a savings or checking account for them. This will make them feel more like an adult.

You can also feel free to download a banking app on their phone to let them see how much money they have in their bank account at one time. This is a great way to teach your child the importance of monitoring and budgeting your finances.

5.      Don't Be an Open Line of Credit

Even though this tip is easy to write down on paper, it is difficult to execute. Nevertheless, make sure not to be an open line of credit for your child. Simply giving your child anything they want will only hurt them. It will make them feel entitled and not teach them the value of saving or working for money.

As we mentioned above, require your child to do age-appropriate chores to earn their allowance. When your children are older, you can get them a real job. Then, they can pay for most of their wants with their own money, not yours.

If you absolutely must lend out money to your child, use that as an opportunity to teach about credit and loans. Explain to them that they will need to pay interest in addition to the money they borrowed. Make sure that they fully understand why you are teaching this and how it will impact their life. Importantly, follow through and make them pay it.

6.      Talk About Budgeting as They Age

As your child starts getting older, make sure to bring up budgeting. This is especially true for high schoolers. Many young adults get into the real world, but they are lost in creating and sticking to a budget based on their lifestyle and needs.

Sitting down and talking with your child about budgeting will go a long way. There are different budgeting techniques you can show them. While they are in high school, encourage them to try out a few to find the method that works best for them.

As you talk about budgeting, also help them track their spending. You can do this using an app or the tried and true checkbook method. Most likely, your child will not want to budget or track their spending. You can set incentives to encourage them to keep up with their budget and spending habits.

7.      Be a Good Role Model

Finally, the last tip for teaching your child about saving money is simply being a good role model. Children are much less likely to listen to what you have to say if you don't lead by example. Be a good role model by saving your money and being savvy in your financials.

Of course, you don't have to be perfect. Everyone makes mistakes. Instead of trying to hide this from your child, explain to them the mistake and explain to them what you should have done instead. This will show them that finances come with a learning curve and that what matters most is that you are improving.

Conclusion

All in all, teaching your children to save should start now. Though they might resist the lessons at first, there are easy things you can do to teach your child the value of money, such as requiring them to do chores, talking about money, and being a good financial role model. They will thank you later!