How to Teach Your Kids to Save Money

Kimberly Blaker,

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.

Help your child develop good saving habits

Allow children to make some of their own spending decisions. Place reasonable limits and offer appropriate guidance but allow them the chance to learn from their mistakes.

Don’t give your children money every time they ask for it. Instead, make a loan with occasional opportunities for them to learn the costs of borrowing and the experience of loan repayment.

Charge interest on loans so children learn the cost of borrowing. Realize, regardless of how financially savvy we raise our kids to be, borrowing does have its place. At the very least, it’s often necessary or practical for acquiring a college education, reliable transportation and a home.

Don’t be completely secretive about family finances. Children have few opportunities to see and experience the financial side of the adult world. This doesn’t mean you should disclose everything. But it’s easier for kids to understand if they can see it in concrete terms. Develop a detailed household budget, then explain it so your adolescent can see how your family spends and why.

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.

Categories: Elementary Age, Money, Site, Toddlers, Tweens & Teens

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