There are a handful of ways you can encourage your kids to save and manage money. In addition to the short-term benefit (money doesn’t grow on trees) you’ll instill in them the financial wisdom that will carry them into adulthood.
- Get children interested in money early.
At age three a child can learn the different coins. “When we take the bus to the zoo, I let Alice drop the coins in the box. It’s fun to watch them drop and it makes her feel like she’s part of the experience,” said Janet Atwater, mother of two small children.
Explain how to tell the coins apart and help them store up their change. Although piggy banks are cute, a clear bank or container works best. It allows your child to hear, feel, and see the money accumulating – much like reading the daily mutual fund prices in the newspaper or examining a quarterly retirement plan statement.
“We teach our kids to save to spend----not spend and make payments,” said Marvin Brown, business-owner.“You’ll save a lifetime of car/interest payments and have more freedom to choose the kind of car with no financing.”
“We’ve found that an emphasis on saving works better when we put it with an emphasis on wise spending. We shop with our children as they spend their allowance money on toys. It’s rewarding to hear one of my sons recognize a price that isn’t a good deal,” added Doug Garnett, Atomic Direct.
- Savings can be a habit.
Years ago I remember being taught that “part of what you earn is yours to keep.” When my daughter, Linette, was little we had two piggy banks -- one for spending and one for a larger goal (college, car, trip). We referred to them as the “put and take” money and the “put and keep” money. We use the same system today with many others. Like any positive behavior you instill in your child, it becomes a learned skill. Linette learned her money lessons well. She’s been my business partner for many years.
“Our teens learn to "do the math" for unit pricing and look for the lasting value of quality products. Sometimes you have to allow them to make a dumb decision so they can see the consequences,” offered advertising executive Bob Treuber.
- Open a savings account with your child.
Young children in grade school love having their own bank accounts. They can empty the piggy bank, or bank checks of their own and have the experience of working with the banking process. They can learn to read a savings account statement and see how their money accumulates. You can give your child a compound interest table (available for the asking at most banks) to let them anticipate how their money will grow.
- Encourage goal setting.
Learn to establish measurable goals with time lines. Have your kids write down their “want” lists, along with a deadline for obtaining the items on the lists. For example, your child may want inline skates by the end of the summer or a mountain bike by next year. Visualizing may give kids the added motivation they need to save.
Parents often match their children’s savings every time they reach a certain dollar amount by themselves. Such a proposition sounds just as appealing to a child as it would to you if your boss told you the company would kick in a dollar for every dollar you saved over $10,000.
- Give regular allowances.
Allowances must be consistent. Kids get the experience with real-life money matters by letting them save regularly, plan their spending, and be self-reliant. You should determine the amount of allowance that fits their age and responsibilities.
Some parents nix the idea of allowances, but surveys have shown that kids who received money from their parents as needed saved less and were broke more often than children who earned allowances, even when the total amounts children in each group received were the same.
The money habits your children learn – and those exhibited by mom and dad – will carry over into adulthood. While you may be proud of the 12-year-old who saves enough to buy a $400 bike, you might be even prouder of the 22-year-old who can move into her first apartment without having to ask mom and dad for a loan, or the child who put 30% down on his first home. One day they might say, “Thanks, Folks, I owe it all to you.”
For more information you can call McGee Financial Strategies by dialing (503) 597-2222 or visit them at www.mcgeenet.com