Saving money is a key building block to financial success. As we begin a new year, it’s an ideal time to teach your children the importance of saving money and help them lay a foundation that they can build upon later in life to be financially successful.
Start Them Young
It’s important to teach your child at an early age the simple basics of saving money. Kids as young as kindergarten age can have an understanding of how money works. Keep it simple, explain what money is and how it is used. Show them how money is used when you make purchases. In addition to teaching them how money is used to purchase things, show them that money is also used for saving.
Needs vs. Wants
Help children understand the differences between needs like food, shelter and clothing and wants which are all the other extras. Explain that money is used for needs and we save for the wants. This can get the conversation started on why we save. If you use a budget, show your children how your budget works. Explaining to them and showing them that you only have a certain amount of money to spend on things will help them understand the importance of saving so you can purchase the other things.
In this day and age of technical advances, we are accustomed to instant gratification. We want things and we want them now. Teach children that we can’t just go out and buy everything we want. If it’s not a necessity, we need to save for it.
Set a Goal and Plan
A savings goal can be as simple as saving for that toy your child wants or as complicated as saving for college. Get your child involved with setting up a goal and a plan on achieving that goal. Again, you can introduce the use of a budget and how it works. This is a great way to keep them motivated.
Opportunities to Earn Money
Providing an opportunity for your children to earn their own money is another great motivator. Giving them an allowance or having them complete chores to earn money gives them a chance to make decisions on how to use the money they earned and an opportunity for you to tie in the above-mentioned saving lessons.
Mode of Saving
A piggy bank is a simple but great way to teach your young kids the importance of saving. Have children put coins and bills into a piggy bank so they can watch their money grow. Open a savings account for your children and every so often, have your children deposit that money into the savings account. Show them how the money will continue to grow in that account. For older children, look into a youth account to help save for bigger purchases or even college.
Lead by Example
In addition to the above tips, nothing is more important than leading by example and modeling good financial behavior to your children. Children learn by example. If you want your children to develop good saving habits, they need to see you making good spending decisions and saving choices. Model behaviors that you want your children to learn and adopt so they can be financially literate and have a life time of financial success.
Please note: This information is designed to offer a general understanding of common financial terms and practices and should not be considered financial advice from Charter Oak Federal Credit Union. Every individual has different financial needs and goals, which should be discussed with a financial professional.