Teaching kids to save their money is more of an art than a science. Here are some tips to help you succeed.
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“Mom, can I get this with my allowance?” my six-year-old asks, holding a squishy emoji keychain.
“Didn’t you tell me last week you were saving up for a Lego airplane set?”
“Yeah, but…I just want to get this.” she counters, looking up at me with no sign of remorse.
My girls had learned a lot over the past year through their allowance. For example, they now had a better understanding of prices and affordability.
Yet, all too often, their intention to save for a larger purchase was sidelined once an alluring trinket caught their eye.
Saving money still seemed an elusive concept for them. And yet research shows that teaching kids how to delay gratification and set money aside is one of the most important money lessons parents can teach.
I felt stuck. How could I get this lesson through to my girls and let them understand that saving for a considered, planned purchase could give them greater satisfaction than wasting their money on a small, impulse buy?
Shortly after we returned from the store – where yes, my daughter purchased her emoji – I began to think of and research ways I could better teach my girls the importance of saving.
Here’s what I found:
Simply creating a “save” jar isn’t enough
On the first day we began giving our girls allowance, I created three jars: spend, save, and give. The idea was that for every $3 in allowance, one dollar bill would be placed in each jar, providing them with a bit of insight into how to budget money.
What I soon found is that the save jar didn’t teach my kids a thing about saving money.
Even though a dollar bill was placed in the save jar each week, in my daughters’ minds that money was no different than the money in their spend jar. Both were sitting right there, available for day-to-day purchases as far as they were concerned.
Writing down goals helps
To help them distinguish between money saved and money available to spend, I started having my daughters write down their saving goals.
With the Lego set, my daughter had talked about a goal but had never actually written it down. Having their specific goal written down makes it more tangible. And keeping track of weekly savings lets my kids see how far they’d come in achieving their goal.
After printing out a few of the savings sheets below, I placed them in binders so each week my daughters could make a note of how much money was in their savings jar, letting them see how much closer they were to their goal.
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Interest as a motivator
The savings sheets helped somewhat – and a few minor goals were achieved – but it was still clear my girls didn’t see quite see the full benefit to saving their money.
I considered what motivates adults to set money aside. Sure, many adults are motivated by the prospect of achieving a goal, but what adds to the incentive is interest payments that grow money.
While I contemplated opening a bank savings account for my girls, interest rates were so low that I knew they would barely see any increase in their account.
So instead, I decided to play the role of bank and set my own interest rate. At the end of every month, I provided a 10% interest payment for any money in savings. This meant that if there was $10 in savings it would turn into $11 – enough to encourage young kids to keep setting money aside.
If your kids already have a solid understanding of physical bills and coins, it could be a good time to use a service like Greenlight. In addition to automatically depositing allowance money in a separate account for kids each week (or month) through its app and debit card system, Greenlight also provides a feature that lets kids set money aside into a savings account with an interest rate that parents decide. Click on the logo below to learn more:
Stories can inspire
Beyond writing down goals and providing interest payments, I’ve also discovered that stories can be educational and inspire kids to keep saving.
I’ve shared a few stories with my girls of times when I had to save – for my first car, for example – to let them see how saving works in the adult world, where purchases are larger and more critical.
We’ve also read a few books together that specifically highlights what happens when people stick to a savings goal (or don’t).
Three books we’ve enjoyed include:
See Related: 28 Children’s Books About Money
Practice makes perfect
“Mom, how much money do I have?” my now 8-year-old daughter asked the other week while we were rummaging around a stationary store.
I told her how much, after checking the amount on my Greenlight app.
“Hmmm….” she muttered, staring at a package of puffy heart stickers.
For weeks she’d been saving up to buy a BFF necklace to share with her good friend at school.
A few years ago, this longed-for present would have quickly been forgotten. But lately, I’d noticed my daughter was more intent on reaching her savings goal, even if it meant not purchasing a dozen sparkly heart-shaped stickers she described as “cool”.
At ages 10 and 8, my girls are hardly champion savers but progress has certainly been made. As with everything in parenting, progress is the goal.
And at least for now, we have a lot fewer emoji keychains cluttering our house.