8 Tips to Teach Kids to Save Money

How much money have you been able to save since the year started? If you are like most people, probably not much. That is perfectly normal because we live in a world filled with temptation, and there are just so many things to spend our money on! According to a recent LendingClub survey, as many as 54% of adults in the United States live paycheck to paycheck, with little to no money set aside for the future. If you have kids, you know that they can be tiny money pits, and they always seem to want the latest toy or gadget. As a parent, it is essential to teach your kids the value of money and how to save up for the things they want.

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Table of Contents

How Much Your Kid Knows About Money?

Before teach your kids to save money, it is essential to assess how much they already know. After all, they might have picked up a thing or two from watching you manage your finances.

One way to do this is to ask them questions about money. See if they can answer basic questions such as:

How do people earn money?
What are some common ways people spend money?
What is a budget?
What does it mean to save money?
What are the benefits of saving money?

If your kids cannot answer these questions, it is good to start from scratch. However, if they can answer most of these questions correctly, you can move to more advanced topics.

Why Should You Teach Your Kid to Save?

There are several reasons why you should teach your kids to save money. For one, it can help them become more financially responsible adults. It can also teach them the value of delayed gratification, an important life skill.

Moreover, teaching your kids to save can also instill a sense of financial security. When they know how to manage their money correctly, they will be less likely to experience anxiety and stress when it comes to finances.

Lastly, teaching your kids to save can also help them build up a nest egg for the future. This can come in handy when they want to buy a house or a car or when they want to start their own business.

How Can You Encourage Your Kid to Save Money?

Again, there are many ways you can encourage your kids to save money. One way is to offer them incentives for saving. For example, you can match the money they save each month. This will encourage them to keep more, but it will also teach them the value of compound interest.

Another way to encourage your kids to save money is to help them set up savings goals. It could be short-term goals such as saving up for a new toy or long-term goals such as saving up for college. Whatever the goal may be, make sure it is realistic and achievable.

You can also help your kids track their spending, which will teach them to be more mindful of their spending habits. You can achieve this in multiple ways, but one way is to give them a daily or weekly allowance and then have them track where they spend it.

8 Tips to Teach Your Kid to Save money

Now that we have gone over the basics, it is time to get into the nitty-gritty of things. Here are 8 tips you can use to teach your kids to save Money:

1. Teach Them About What’s Essential

One of the first things you should teach your kids is what expenses are essential and which ones are non-essential. This will help them understand that they do not need to spend money on everything they want.

This is an important distinction because it will help your kids learn how to prioritize their spending. For example, they will know that they need to spend money on food and shelter first, and then they can save up for that new toy they want.

2. Let Your Kid Earn Their Own Money

If you want your kids to learn the value of money, you need to let them earn their own money. This could be in the form of an allowance or doing chores around the house.

When your kids earn their own money, they will be more mindful of how they spend it. They will also be more likely to save up for something they want because they will know how hard it was to earn that money in the first place.

3. Set Some Savings Goals for Your Kid

As we mentioned earlier, one way to encourage your kids to save money is to help them set up savings goals. This could be for a short-term goal or a long-term goal.

If it is a short-term goal, you can help them break it down into smaller goals. For example, if they want to save up for a new toy that costs $100, you can help them break that down into saving $10 per week.

If it is a long-term goal, you can help them develop a savings plan. For example, if they want to save up for college, then you can help them figure out how much they need to save each month. You can also help them find ways to earn more money to reach their goal even faster.

4. Help Your Kid Track Their Spending

As we mentioned earlier, one way to help your kids become more mindful of their spending is to help them track their spending. This could be in the form of a daily or weekly allowance.

You can also give them a piggy bank and have them put all of their spare change in it. Every month, you can help them count up their savings and see how much they have saved.

This will teach your kids the value of money, which will also help them develop good financial habits.

5. Give Your Kid a Place to Save money

Another way to encourage your kids to save money is to give them a place to keep it. That could be in the form of a piggy bank or a savings account.

If you give them a piggy bank, you can help them count up their savings every month. Doing this will teach your kids the value of money, but it will also help them develop good financial habits.

And if you give them a savings account, you can help them understand compound interest. Your money grows over time because you are earning interest on your claim.

6. Don’t Be Harsh When They Make Mistakes

Parents make one mistake by being too harsh when their kids make financial mistakes. This could be in spending too much money or not saving enough money.

Instead of being harsh, you should use this as a teaching opportunity. Help your kids understand why their decision was a mistake and how they can avoid making the same mistake in the future.

7. Offer Savings Incentives for Your Kid

If you want your kids to save money, you need to offer them savings incentives. This could be matching their savings or giving them a bonus for reaching their savings goal.

On the one hand, by doing this, you’ll be able to teach your kids the value of money. On the other hand, you’ll also be able to encourage them to save up for their future.

8. Act As Your Kid’s Creditor

If your kids want to purchase something beyond their means, you can act as their creditor. For example, if they’re going to buy a new toy that costs $100 but only $50, you can loan them the other $50.

But make sure that you charge them interest on the loan. Yes, charge them. That might sound a bit harsh, but keep in mind that you’re rewarding them with knowledge, and they need to find out how the world works.

Closing Thoughts

That’s about it. By following these easy tips, you’ll be able to improve your kid’s financial knowledge and their life. The key to teaching your kids about money is to be patient and make it fun. If you do that, they’ll be well on their way to becoming financially responsible adults.

About Me

Hi, there. I am Lin. Together with my husband and two kids, we live in the beautiful Netherlands in Europe. I am dedicated to self-development, creating quality time for the whole family, and fully supporting kids with their potentials with all I have learned from engineering, MBA, and 10+ years of working experience in the energy sector.