Saving money and spending wisely is a lesson that you must teach your kids so that they will be able to build wealth and have a secure financial future. Many of us have learned it the hard way, with some having to go through lots of debt to be able to learn the value of saving and spending wisely. There are ways to empower the next generation to keep them from being reckless spenders in the future. You can teach them how to be wise with money at a very young age, as early as five or six years old. Children are more perceptive than we often think. So if you’re a dad or a parent, here are some great ways to teach your children about saving money.
Start a conversation
One of the most important thing you can do as a parent is to start a conversation with your child about money and the importance of saving. A child may innocently ask questions like “Are we rich?” and it can be answered in a way that emphasizes family values like responsible spending and hard work. This way, your little kids will know that money is earned, not just something that your family has.
Show them that stuff costs money. You can teach what every dollar bill and coin can afford. Or better yet, take your children with you to the store. Rather than saying, “That doll costs $10,” give her the money and have her physically hand the money to the cashier. That spending experience will have more impact.
Let your children know they can have an allowance, but it’s up to them to save up for their wants, not yours. You can ask what they want to save up for and ask them what they want their future to look like. Get them thinking long term so they can have a positive relationship about money.
Start the value of saving with a piggy bank
When your kids are in primary school you can teach them to save in a piggy bank. Teach your kids that the goal for it is to fill up the piggy bank with money until there is no room. Illustrate that the piggy bank is for saving and not spending. It’s better if you use a clear piggy bank (if you can find one) or a clear jar so they can see the money growing.
Let them know right away what you intend to buy before going to the store
Sometimes, kids can be pushy with their wants and they may continue to bug you so you would give in and buy what they want. For a parent, it can be hard. For instance, you’re in a shopping mall with lots of people and your kid is throwing a tantrum because he badly wants that helicopter toy, but it’s expensive and not on your budget. You can be tempted to just buy the toy to save yourself from embarrassment, but that will teach your child that he can get what he wants by crying and making a scene. To avoid this, talk to your children before you go to the store about the purpose of your trip. For instance, you can say, “We are going to buy you pants and shoes and that only. If we buy toys, you won’t have anything to wear at school. Do you want that?” Teach your kids that they must be able to weigh decisions and understand possible outcomes.
Use saving jars
If your kid really, really wants a toy or an action figure, teach them to save up for it. Give them some jars for each of their desired things to purchase, and offer them a small allowance each week that can still have room for savings. For instance, if you give your child $5 a week, give it to them in one dollar bills a day. They can save up part of it during the day so they can contribute to their savings jars for different savings goals.
Help them distinguish between needs and wants
Children must understand needs and wants as far as the family goes. You can give your children a teaching moment that mom and dad spends their money on the important things like electric bill, phone bill, rent, mortgage, food and groceries. Teach them that you pay these things every month and you cannot afford to lose money by buying for luxuries instead of these. Make a list and help them understand how much these needs costs, and list what items are considered luxuries. If they have an idea on how much you spend as a family every month, they will have a bigger picture that not all their wants are worthy of buying.
Avoid impulse buys
“Dad, I just found this pretty dress and it’s perfect! Can we buy it please?” your daughter asks. You give in and pay. But now, you never see her wear it because she figured out there is no right occasion to wear it for.
It’s easy to get caught up in buying something spotted in a store or online, especially with a big “sale” sign on it. Candy bars are always at the grocery checkout for a reason – because impulse buying is a big business. You can teach your child deterred gratification before making a decision about purchase. Encourage your child to sleep on it and wait for at least a day before they purchase it. If it’s still a desire, see if it fits the budget.
Set an example
Money habits in children are formed by the time they are 7 years old. Those little eyes are watching how you spend. They will notice if you are arguing with your spouse about money, if you bring home takeout everytime, or if you regularly buy new gadgets for the home. The best way to teach your kids to save and spend wisely is by doing it yourself. Set a good example for them and they will much more likely to follow it when they get older. You can also have your own savings jar that you put in your funds regularly. You can bring them to the bank every time you make a deposit on your savings account. Also, reiterate the message that every time you get paid at work, you save a portion of it to prepare for their future.
Teach them contentment
As your child gets older and he or she has friends who are better-off, your child will compare what they have with them. “Dad, my friend Chad has a brand new car bought by his dad as a reward for being with honors! How come I still have to drive this old car even though I get good grades?” “Dad, my best friend Chelsea got to invite the whole school for her Sweet 16 pool party! I want to have a big party too!” Sometimes, they get ideas from their friends online of even from total strangers and they feel a tinge of envy.
It is important to teach them contentment at a young age. Let your teen know that your child’s car, although old, is still running very well. Let her know that you can still throw her a memorable party without spending a big chunk of your savings fund for it. Emphasize the good things your family has and what he or she should be thankful for. This way, you can help your child be happy with what they have.
Teach them how to make a budget
Budgeting is a life skill that your child can value, especially when he or she grows older. Most people wonder where their money went because they didn’t set a budget. Setting a budget means telling your money where to go and being mindful of the things you can and cannot spend on. Gas money, entertainment with friends, and needs for school projects can become budget categories for your child as he or she gets older. Get them in the habit of budgeting their allowance or extra income, no matter how small it seems to be. The must learn the importance of making a plan for their money while they are still living with you, to make them responsible spenders and savers in the future.
Open up a bank account
Once their piggy bank or jar is full, take your child to the bank to open up savings account for them. Have them count how much money is going to be deposited, so they can have an understanding of how much money they have. Then you can reinforce the idea of interest. This can provide a great source of motivation for your children if they understand that their money will grow if they won’t touch it.
Help them figure out how to make money
Teenagers have a lot of free time, like summer break, spring break, winter break and fall break. If your teen asks you for allowance to get together with their friends, help them find a job. Tell them that his or her outings are not in your budget, and help them work for it. There are a lot of jobs for teens on vacation breaks and just look into what you think your child can excel at. Better yet, help them become an entrepreneur. These days where online selling is very popular, it’s easier than ever for a teen to start up their own business and turn it into profit.
Teach them to steer clear of credit cards
As soon as your child turns 18 years old, they can get hounded by credit card offers, especially once they are in college. Teach them that debt is a bad idea, so they won’t become another credit card victim. Credit cards are helpful, but when used by the wrong hands, it can be self-destructive.