How to Teach Your Kids to Save Money
Sallie Mae’s 2016 “Majoring in Money” report states that students ages 18 to 24 carried an average credit card debt of $906 in 2015. This exemplifies the point made by Sallie Mae in a 2013 report that credit card usage isn’t going to go away. The average credit card balance carried by college students in the 2013 report was just $499. So if anything, it indicates credit card use, at least by young adults, is on the rise.
Credit card responsibility is crucial to kids’ future financial wellbeing. And there’s good news for those who learn and develop good saving habits early in life: They’re more prepared to develop into financially responsible adults.
Start young teaching kids to save
You can start teaching with values of coins, around the ages of 4 to 6. Keep it simple. Allow your child to earn money from small chores to save in a piggy bank.
When to start giving an allowance?
An allowance, starting around age 7, is essential to help kids learn about money and develop good habits. Familiarize your children with banking. Open a savings account so they can watch their money grow. Also, help set achievable goals, such as saving for a new toy or putting away money gifted during the holidays.
Keep in mind, many banks charge service fees unless a minimum balance is kept and frequent trips to the bank may be impossible. As an alternative, set up your own “family bank.” Give your child a spare checkbook ledger or savings passbook. Then copy blank savings deposit and withdrawal slips from your bank for your children to use. Require them to fill out the slips and log transactions in the ledger. Also give your children monthly interest for their savings so they can experience the immediate reward of saving money.
Have teens pay some family expenses
Designer clothing, entertainment and car expenses are the biggest areas of teen spending. Some teens also save for college. But few are prepared for the adult world, writes developmental psychologist Nancy J. Cobb in Adolescence: Continuity, Change, and Diversity. That’s because most teens aren’t primed for the responsibility of paying for food, housing and health care costs.
Teens involved with the family budget and who contribute to family expenses learn valuable lessons. Showing teens the spending categories in which they have a direct impact on family expenses is helpful. Also, agree on a reasonable amount which your teens can contribute to help cover those expenses. It’ll go a long way toward preparing teens for adulthood.
Teens’ work hours should be limited to no more than 10 to 15 per week. According to Cobb, researchers have found adolescents who work, especially 20 or more hours per week, are not as engaged in school as their nonworking peers.
Kimberly Blaker is a parenting and lifestyle freelance writer.