How to Teach Saving to Kids
English: Kids at shore (Photo credit: Wikipedia)
Modeling behavior, good or bad, is the key to teaching children. Parents know this is true, but it’s so much more difficult in practice than in theory. Keep in mind your spending habits will likely be passed down to your children. Even if you think you’re keeping finances out of conversations your kids can hear, you’re probably wrong.
Many people make the mistake of not discussing the family finances with their kids. This secrecy leads to ignorance. Instead, family finances should be discussed openly so that children learn from an early age how important it is. Of course, parents should also make sure to repeat to children that family finances are just that, for the family’s ears only, and shouldn’t be shared with friends.
How You Shop
Every single time you buy something around your children, it’s an opportunity to explain your choices. For example, if you need to fill up the gas tank, do you seek out the lowest-priced stations? Do you have an app for it, or do you simply go to the cheaper station when there’s a street of them? This is something Junior will need to know when he turns 16.
Grocery shopping, clothes shopping and shopping for entertainment are also key teachable moments. Can you justify spending money on designer jeans if your savings and retirement account isn’t in the best shape? Have you explained that shopping for produce at farmer’s markets isn’t just more affordable, it’s also often fresher? Once you consider every shopping moment a means of teaching your children smart savings, you’ll probably find yourself changing your habits.
How You Save
If you trust your kids not to have a blabbermouth, there’s no reason why your paycheck should be kept a secret. This is a scary thought for many parents. However, the only way anyone, including children, understands value is to see it in black and white. They should understand that paychecks are taxed, Mom and Dad only get a certain amount of money per pay period, and that a set amount should always be put in savings.
It’s also important to display smart splurges in front of the kids. Finances are serious and often not very much fun. However, practicing smart money management can help fund that great deal on an aquatic therapy pool, trip to Disneyland or new car.
Start Talking
A lot of parents depend on allowances and the kid’s college fund to try to teach finances but that isn’t always enough. Allowances can be one great tool in an arsenal, but it doesn’t work alone. Share your own finances with the kids so that they start to see the big picture. If they’re discreet, you can share everything from just how much the mortgage is to how close you are to paying off your own student loan debt.
Sharing and showing kids the reality of things is the only way to truly prepare them. However, the key here is discretion. Children mature at different ages, and your seven-year-old might be able to handle it while your ten-year-old can’t. Use your judgment and start opening up about the reality of finances.
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Category: Family Finances
