Saving money is one of the most important skills you can teach your children. Four in ten American adults say that they would not be able to cover a $400 emergency. Teaching saving skills from an early age is the best way to help children build a solid financial foundation.
Start with a piggy bank or savings jar
Using a clear jar or a piggy bank is a great starting point. Encourage your child to fill the jar with dollars and coins until there is no room left. Explain that the money is for the future. Show them how a quarter from yesterday plus a dollar today means that they have a dollar and a quarter now. Make a big deal about how the money is growing in the jar each time they add a little more.
Set an example
Talk about money and budgeting around your child. Show them your grocery list or a bill as an example. Encourage them to ask you questions about money, where it comes from, and where it goes. Show your children that you save a part of your check every time you get paid. Most importantly, show them that things cost money. When your child wants to buy a toy or book, have them take the money from their jar. Using the money from their jar has a much larger impact than explaining how much something costs.
Open a bank account
Once the piggy bank or jar is completely full, take your child to the bank and help them open a savings account. Make sure to count the money that you are going to deposit, that way they understand how much is being deposited. You can also talk about the security that comes with placing the money in a bank account. Talk about how money could become lost or stolen, and that the bank is a safe place to keep their money.
Explain how interest works, and that the amount of money will grow overtime. Interest can help motivate your child to save more by helping them see how their money will grow.
Use Savings Jars or Envelopes
As your child becomes used to saving you can begin using savings jars or envelopes for goals. Encourage your child to “Save, Give, Spend” using different jars or envelopes. By helping them categorize their money, you are helping them learn the importance of a budget. Having some money set aside for spending encourages them to let their savings grow. Using one jar for giving helps children learn to share and donate responsibly.
Helping your child divide their money is an effective way to teach your child how to budget. As your child grows, budget jars or envelopes can become a written budget.
Write down goals
When your child wants something specific, have them write the goal down. Include the amount and talk about how long it will take to reach that goal. Keeping track of weekly savings toward a goal will help your child see their progress. Learning to write down financial plans is a great skill to have. Make time each week to check in on their goals and progress. A perfect time to do this is when you are giving them their allowance or chore money. Take this time to update their goal progress and divide the money between their savings jars.
We are not born with the skill to save money , but it can be taught. By helping your child learn now, you are teaching them valuable life-skills. Remember, our bankers are here to help with any questions you might have about your savings. You can schedule time to chat, open your child’s first savings account, or plan a college savings fund. We are available by phone at 615-221-2020, email, or you can stop by your local branch.