For parents, every milestone their child reaches is cause for excitement and celebration. Getting older usually means more independence and, more responsibility. And a primary responsibility is learning how to save and manage money.
If your child is ready to start earning, they’re ready to start saving. We’ve got some tips and strategies to help teach kids save money.
Explain goal setting
If you want your child to grow into a responsible saver, it helps to explain to them why saving is important in the first place.
Talk to your child about the rewards of saving up to buy something. When you have the patience to put money away for a big or important purchase, you can often afford something bigger and better than what you originally wanted. For older kids, you can explain how saving can keep them from going into debt and owing interest on a purchase.
If you’re just introducing the concept, help your child set a short-term savings goal so that they can quickly see and understand the benefits of saving.
Clarify wants and needs
In the discussion of goal-setting, it’s helpful to explain the difference between wants and needs. A need is something considered essential. A want, on the other hand, is something unnecessary but desired.
With kids, it’s not quite as clear because parents often provide what is considered a need–water, food, shelter, etc. So, when teaching kids to save money, you have to phrase wants and needs in a way they can understand.
Let’s say your child is saving up to buy a bike, and they’re halfway to their goal. In the meantime, a new game comes out that they want to buy. It’s a teachable moment on wants as opposed to needs. Do they really need the game, or can it wait?
If they spend money that they’re saving for a bike on a short-term want like a video game, it means they’ll have to wait longer to earn the money needed for their new bike. It’s a lesson that when learned at a young age can reap benefits later in life, helping them to avoid impulsive purchases and make responsible spending choices.
Open up a youth savings account
With younger children, a piggy bank is a perfectly practical way to introduce them to the idea of saving their money and working toward a savings goal.
Older children, however, can benefit from a youth savings account. Many credit unions offer a savings account that helps young members learn first-hand how saving money and earning interest works in real life.
For kids who need a little bit of a nudge to start saving, you can offer to match their savings up to a certain amount.
Teach them to budget and track spending
Another effective way to teach kids about money is to encourage them to keep track of their spending. Once they see what they are buying and how often, you can help them develop a budget.
This can be an early lesson in money management that will make personal finance seem less daunting when they are young adults out on their own.
Set a good example
Finally, as your child’s first and best teacher, the most effective way to help them learn about saving their money is to lead by example.
You can tell them every day that it’s important to set goals and put money aside, but if they see you spending a lot of money on impulse purchases, they will notice the discrepancy. Take opportunities to talk about money, teaching your children real-world money lessons that will improve their financial literacy and help them become responsible savers and spenders.
Teach kids to save money with University Credit Union
At University Credit Union, your child, and you, can begin a relationship with us for a deposit of only $5. If you’re interested in higher dividends and friendly member service, we’re happy to help you grow your hard-earned money with our savings account.
Whether you’re a parent trying to encourage a child to save, or someone just starting who wants to put your money to work for you, University Credit Union can help.
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