Teaching children to save money is crucial, but not easy. From a young age, they’re exposed to marketing messages telling them to spend more money – with very little said about saving money and the rewards of delayed gratification.
That puts the burden on parents to teach their children about saving. Well, parents and pigs. You see, starting early is important, and the best savings tool for young children is the old-fashioned piggy bank.
The Two Piggy Bank Approach
Many parents buy a piggy bank for their child and show him how to put money in the bank, but don’t actually communicate the concept of saving. Getting two banks, on the other hand, can make it clearer for your child. Here’s how it works…
One piggy is for saving.
One piggy is for spending.
Go ahead and label them. Hang signs over their heads or place stickers on them. When your child gets some money for an allowance, birthday, or extra chores, he should divide it between his saving and spending piggy banks. For example, your child can put 60% into savings and spend 40%, or 70/30.
This helps teach children about the different purposes of money. It can be used immediately for fun or it can be set aside for later, which is an important lesson to learn at a young age. It helps prevent children from developing a scarcity mindset and supports good saving habits at the same time.
When you go to the store, you can ask your child if he wants to take any spending money. He can then make independent decisions about what to do with his money, so that as an adult he will feel in control of it. But if he’s already spent all his spending money, make him live with that decision. Don’t bail him out – whether with your money or letting him use his savings money.
An Introduction to Setting Goals
Start young. You’re at the store and your children start asking for things – candy, toys, stuffed animals, and bright balloons. These situations are opportunities to teach children that you can’t always buy everything you want. And it’s the perfect opportunity to help your child learn the benefits of saving.
Let’s say your young child is at the toy store with you and decides he wants a stuffed animal he “can’t live without.” Instead of buying it for him or saying no, why not turn it into a teaching moment? Take a look at the price tag with your child. Is it something he can reasonably save for? If so, take a photo of the animal. Tell your child you’re going to teach him a new game.
Print out a picture of the toy he wants and tape it to his piggy bank – he now has a savings goal. You can count the money in the piggy bank and show him how long it will take to save for the toy if he sets aside his money.
If your child gets an allowance or is paid for some of his chores, he can add that to his piggy bank. You can also give him extra ways to earn money for the toy. Depending on the price, you may agree to pay for half if he saves the rest. This can help a child learn the power of saving without giving up because the goal seems impossible to achieve.
Here’s the key: don’t buy the toy for him. He will either save money for it or he won’t. Either way, he will learn a valuable lesson.
You can begin teaching your child how to save when he’s very young, even before preschool.
Mason Jars: Not Just for Canning
Sometimes the best way to teach a concept is to use the simplest tools – in this case, Mason jars. You can use these old-fashioned storage containers for more than just pickles.
Often the lesson of saving money is one-dimensional. Children put their money into a piggy bank and don’t really take it beyond that. At some point they raid their piggy bank and the money is gone. The two-bank system helps mitigate this, but still falls short.
Once your child is a little older, the Mason jar approach can teach a multi-dimensional approach to savings.
Grab four Mason jars with or without lids, a marker, stickers, and a few pieces of paper. Label each jar and have your child decorate them. The labels should read:
- Grow (invest)
- Give (donate)
Now sit down with your child and talk about each concept. Teach him what it means to save, spend, grow, and give money, and why each is important. Then give him guidelines about how much he should set aside for each.
For example, do you want him to donate 10% of his income? Together you should make some decisions about what to save for, how to invest, and what organization he wants to support through donations. Let your child make as many of the decisions as possible.
The Mason jar approach works because children can see their money and easily track their goals. As they get older you can transition to bank accounts and investment accounts.
One practical tip: Keep the Mason jars high out of reach of young siblings who might try to pick up and subsequently drop the jars, shattering the glass and scattering the money.
Saving for the Long Haul
The concept of saving money can be challenging. You tell your child to save money and he wants to know why. Instant gratification is certainly a significant hurdle to overcome, even for adults. We often focus on short-term savings goals with children. The truth is that these short-term goals are great, but they don’t tell the whole story.
As adults, your children will eventually need to save for many things, including (but not limited to):
- A house
- Their children’s education
- Their own education (if they choose to go back to school)
The list could go on… Think about all the things that you’ve saved for over the years – Christmas and birthday presents, trips to visit family, vacations, retirement, and much more.
Some of these savings goals were short-term. Others you’re still saving for. And then there are those goals that are what we might call “medium-term” goals – vacations, cars, and new furniture. They may take several months to a few years to accomplish.
It’s important to teach your children about the different types of savings goals as well. You can accomplish this in a few ways:
- Help them set short-term, medium-term, and long-term goals of their own
- Work together toward a goal that will benefit them, like college or a car
- Talk about your own savings goals with them
Saving for short-term goals is great and a useful lesson, but don’t forget that there’s more to saving. Teach your child about what they can save for and the best approach for each type of goal.
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