The Boy just got his first summer job and immediately declared he would save fifty percent of every check. As admirable as this idea is, I know my child. His only experience with money comes from withdrawals at the Bank of Mom and Dad.
The Mister and I have been proactive in encouraging the kids to save. When a new video game comes out, The Boy has to use money from holidays to purchase the game. We sit with him and explain our income and budgets so he understands that money does not grow on trees. But is that enough to instill good financial habits that will last a lifetime?
Habit-Builders
Certified financial planner Eric Hutchinson has additional recommendations for children to develop savings habits in his book The Financial Briefing.
- Encourage kids to save something. This is already in place at our house. The Boy has to use rebate programs and Gamestop’s trade-in system to buy new games. We encourage him to set something aside for tithing every week at church so this also helps him spend money more mindfully.
- Help kids balance treats and sacrifices. See above with the video games. The Boy knows that he’s allowed to use the money saved towards a little treat for himself.
- Loose change goes to the emergency fund. We keep an empty water jug to deposit loose change. Most days I collect change and the distinctive thunk scares the cats as I put the change in the jar. We eschew the idea that coins heads down are unlucky. Any money saved is lucky!
- Set an example. The Boy sees my budget so he knows that I’m serious when I tell him “No.” Kids do not miss much, so I make sure he watches me as I plan how my pay will be spent. If he doesn’t see me saving, he might think he doesn’t need to save.
- Keep kids away from credit as long as possible. I have mixed thoughts on this piece of advice. Credit should not be feared, but credit cards used irresponsibility can be a hindrance. Credit card companies are not especially geared with a consumer’s best interest so proceed with caution. Make sure he or she understands what credit pitfalls could lie ahead.
- Schedule money meetings. I need to have a better plan for meeting than launching into a lecture when The boy asks for money. This is a step I need to rethink!
- Help kids set up a real budget. The earlier kids learn to manage a budget, the easier things will be down the line. Younger kids can start learning by jotting their plusses and minuses down on a piece of paper, while older kids can be introduced to budgeting on software and apps.
“Circumstances are always changing as people grow older,” Hutchinson says. “I would recommend going over each year’s changing needs with your kids. The emergency fund has to adapt and be ready for whatever circumstances might pop up.”
With these tips, I’m sure that The Boy is well on his way to great financial literacy!
About Eric Hutchinson, CFP
Eric Hutchinson is a certified financial planner with more than 30 years of experience in the areas of financial planning, investments, estate and tax planning. Hutchinson has professional affiliations with The Financial Planning Association, the Certified Financial Planner Board of Standards and the Investment Management Consultants Association. His 
new book, The Financial Briefing, distils time-tested wisdom based on decades of professional experience and provides an overview of many of the financial and life issues everyone will face at some point.
Raya Fagg is a mom of two from Upper Darby, PA. This post is adapted from her blog, And Starring As Herself…MRSRFKJ.
