Teaching Your Children Good Saving Habits

Start with the savings basics—then look for teaching opportunities and lead by example.

Children are eager to learn as they grow, so it’s important for parents to teach their children positive lessons about money from a young age. When saving money becomes part of a child’s normal development, saving for the future is likely to become a habit. Early financial education can be the first step on the road to financial freedom.

Young children receiving allowance

Start with the savings basics

Experts say that you can begin teaching money-related lessons to children as young as five. Pre-schoolers may be too young to add or subtract, but these youngsters will understand value, and the idea of trading items — which are the building blocks for understanding money. Then, as they acquire basic math skills, your children can be taught more complex financial concepts.

Help your children avoid falling into the instant gratification pit by setting savings goals for an important date. According to CFED.org, this may be “an effective way of delivering financial education that takes into account children’s concept of time.” Open a savings account — then, when your child receives birthday money, or cash from chores, have them put some into the bank to save for bigger ticket items.

If your child is old enough for an allowance, encourage them to direct a percentage into savings. Check the balances often: your children will enjoy watching their money grow as deposits and interest accumulate.

When saving money becomes fun, kids look forward to repeating the behavior.

Look for teaching opportunities

Learning about money shouldn’t feel like going to school, so turn it into fun by finding teachable moments in everyday life. When you go to the bank, explain that it’s like a garden that helps make money grow. You could buy a piggy bank, and encourage your child to fatten it up with spare change. The Credit Union National Association has developed a series of simple games to teach your children about money with good saving habits as the goal. When saving money becomes fun, kids look forward to repeating the behavior.

Lead by example

Children are observant, so they often emulate their parents’ behavior. Be conscious of what you say and do around them; your money attitudes will become theirs.

The power of acknowledgement cannot be overstated. Children love to please, so praising them for positive behavior, like depositing money into a savings account or doing simple chores for pay, helps them feel good about themselves. Encouragement motivates them to repeat similar behavior, which ultimately becomes a habit.

Two sisters earning allowance by washing the family dog

Saving for the future

Try teaching your children money lessons that are fun as well as informative. By helping them develop better money and savings habits now, they’ll have the basic tools necessary for financial freedom as they grow.

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