One of the best gifts that parents can give their children is to start teaching them money-saving habits from a young age. Children who become comfortable with financial management and terminology as youngsters will be better able to budget, manage credit cards and debts, and save for a secure retirement as adults. Here are some of the top ways you can help your children hone their economic acumen.
Give Kids an Allowance
The best way to learn anything is by doing. Giving your children a weekly or monthly allowance lets them start to put their money management skills into action. Age five is a common milestone to start giving an allowance (though there is no one absolute ideal age; each child is unique and will understand the concept of money at different developmental stages). One idea is to match your child's age with a weekly dollar amount, so a six-year-old, for example, would get $6.
Open a Bank Account
Banks have different rules as to when kids can have an account, but some have special children's programs designed to make banks more approachable and kid-friendly. For many children, opening their very own first bank account will be an exciting step on their way to adulthood, and it's a wonderful way to associate a sense of pride with the habit of saving money.
Visual Money Lessons
Some children are visual learners. Before helping your child open a bank account, it can be a good idea to first start with something more visual like a piggy bank. A piggy bank allows kids to watch their money grow before their very eyes and gives them a visual representation of what saving money looks like. It may also be worthwhile to have numerous piggy banks divided into different goals like "Save" and "Spend." Parents may want to consider even including a "Give" saving category to teach about philanthropy at a young age.
We all fall prey to the trap of instant gratification. For children, for whom a day can seem like a year, saving money rather than spending it instantly can be particularly hard. That's why giving your children incentives to save is a helpful tool to teach them the benefits of delayed gratification. Encourage saving rather than spending by promising to match a percentage or set portion of their savings. It's much easier to put aside $10 a month if children know that $10 will become $15 with no additional effort on their part.
Practise What You Preach
Children are wonderful mimics and will learn the most by seeing how their parents handle money. If you have good budgeting and spending habits, your kids are more likely to adopt fiscally prudent habits. For smaller purchases, why not put out a "mom and dad" piggy bank so your children can see you saving diligently for an item.
No matter what methods you use to teach your children about money, it's vital to start early and reward their money-saving efforts.