Is there a good age to start teaching your kids how to save? The sooner, the better!
Generally by 3 years of age children can begin to grasp the basic concept of saving. And, of course, the older they get, the more financially savvy they become. Instilling a savings mentality early on can reap significant financial rewards for your child later in life.
So how do you get started? Explain to your children how saving money allows them to buy the things they want. Help them understand that this can take time, but that the reward at the end is worth it. As an example, you can point out that the house they enjoy living in was purchased by saving money over a period of time.
BankFive offers a fun way for kids 12 and under to learn responsible money management. Our Nickels Savings Account is designed specifically for children, and encourages all deposit amounts. Your child will receive their very own savings passbook, and a stuffed Nickels toy at account opening. Plus, they’ll receive a Nickels birthday card every year.
Here are some other ideas you can use to get your kids excited about saving money:
Ages 3 to 6
The “three jar approach” is a popular way of teaching youngsters what saving is all about. One jar can be devoted to a short-term goal, such as accumulating enough money to buy a certain toy. Another jar can be designated for a longer-term goal, like a trip to an amusement park. A third jar can be labeled “For Fun” and the money placed there can be earmarked for lower-priced purchases like candy or stickers.
Clear jars are best for this practice, since kids can literally see their savings add up. For the younger ones, placing a picture of the item they want to buy can provide visual inspiration. It’s also a good idea to place the jars in a common area, such as the kitchen. This can give your kids a sense of pride and accomplishment as they and others watch the money accumulate.
Additional incentives can be used to encourage your child’s saving. These include matching their contributions dollar for dollar, or offering them a small reward like a visit to the ice cream shop when they reach certain savings benchmarks.
You may also want to set up your own savings jar alongside your child’s as this can help to reinforce good savings habits.
Ages 7 to 14
This is a good age bracket to give your children more financial responsibility and education, since they’re old enough to have a better understanding of the value of money.
When you go shopping, you can explain to them why you’re making certain buying decisions. For instance, point out that you’re purchasing a generic brand of coffee because it’s cheaper than the brand name options with little difference in taste, or that you’re not yet prepared to buy the patio furniture you’ve had your eye on because you need to save a little more for it.
At this age, kids can start to grasp the concept of how loans and credit cards can allow them to “buy now and pay later”, as well as the consequences of having to pay interest on the money they’ve borrowed. You can reinforce this lesson by allowing them to borrow money from you in order to make a purchase. Explain to them that just like dealing with a credit card company, there will be a repayment schedule and that they’ll need to pay you a little extra in interest, above and beyond what they’re borrowing. Who knows? They may think twice before asking for a loan next time!
Children within this age range also have a better understanding of what happens if they buy something with their saved money and then have little left to purchase anything else. It’s a lesson of living with the choices you make, and it’s one that will stick with them throughout their lives.
By teaching your children to save and budget at an early age, you’re giving then a huge financial advantage as they grow older.