How to Teach Your Children About Money and Saving

April 23, 2020

Raising financially responsible children is a crucial part of equipping them for a successful future. It’s not always easy, and the modern world, with its constant temptations of instant gratification, makes it even more challenging. But starting early and consistently instilling good money habits can make a huge difference. This post offers practical tips and strategies you can use to teach your children about money and saving.

Start Early - It’s Never Too Soon

Children are sponges. They absorb information from their surroundings, and that includes how you handle money. Even young children can understand basic concepts like “saving up for something we want.”

Toddlers (Ages 2-5): Introduce the concept of “want” versus “need.” When they ask for a toy, talk about the cost and explain that toys cost money. Use a piggy bank – it’s a visual representation of saving. Simple tasks like putting loose coins into the piggy bank ("We saved for this!") can be rewarding.
Preschoolers (Ages 5-7): Start introducing allowances. Even a small amount can teach them about earning and spending. Help them divide their allowance into categories: saving, spending, and sharing. Play pretend store – they can "buy" things with their money, understanding the transaction.
School-Age Children (Ages 8-12): Expand on the allowance, discussing budgeting and setting goals. Help them create a simple savings plan for a larger purchase they really want. Introduce the idea of interest – explain that saving money and letting it grow can be powerful.

Practical Strategies & Techniques

Make it Real: Don’t just talk about money – do things with it. Involve them in shopping, comparing prices, and understanding the value of goods.
Lead by Example: Children learn by observing. If you're constantly overspending or making impulsive purchases, they'll likely do the same. Practice responsible spending yourself.
The “Three Jars” Method: This is a popular and effective system:
- Spending Jar: For everyday purchases.
- Saving Jar: For larger goals.
- Giving Jar: To encourage charitable giving.
Set Savings Goals Together: Let your child choose a specific item they want to save for (a bike, a game, etc.). This gives them a tangible goal and a reason to save diligently.
Discuss Advertising: Help them understand how advertising influences spending. Point out that commercials are designed to make them want things, not necessarily to help them make a smart decision.
Teach Delayed Gratification: Encourage them to wait for something they really want, rather than immediately buying the first thing they see.

Resources & Further Learning

The Money Smart Kids Website: https://www.moneysmartkids.com/ - Offers a wealth of information and resources for teaching children about money.
Jump$tart Coalition for Personal Financial Literacy: https://www.jumpstart.org/ - A national organization working to improve financial literacy.
Books for Kids About Money: Search online for age-appropriate books on saving, budgeting, and financial literacy.

Conclusion

Teaching your children about money and saving is an investment in their future. By starting early and consistently instilling good habits, you can help them develop the financial skills they need to thrive in the years to come. Don’t be afraid to make mistakes – the most important thing is to have an open and honest conversation with your child about money.