As a parent of two children, I realized early on that trying to teach them the importance of saving money is a tall order. After all, we should all strive to teach kids to save money. But let’s face it, how many 9-year-olds care about stuff like the importance of spending less than you earn, or effective methods for building a retirement nest egg?
That’s not to say it can’t be done. The trick is to make the lesson fun — or at least unabashedly compelling.
Over the years, I’ve employed five strategies for encouraging my kids to save a portion of the income they receive each week for successfully completing their chores.
Give them a magic money jar.
For younger kids, put a clear plastic or glass jar in their room and encourage them to put their coins in it. Then, every time a dollar or two in change has accrued in the container, secretly replace the coins with paper $2 bills while they are away at school or otherwise out of the house. Magic! Your kids will learn how quickly small savings can add up to something tangible.
Teach them about compound growth.
One of the funnest ways for slightly older kids to grasp the true power of compound growth is to offer them a hypothetical job where they get to choose how they want to be paid for the first month: a flat fee of a half-million dollars, or a single penny on the first day and doubling it every day thereafter for 30 consecutive days. Most kids will naturally go with the former — and once you show them why they made the wrong choice, I promise you they’ll never forget it.
Set a goal.
One of the best ways to encourage kids to save money is to make the effort worth their while. If you know your child really has her eye on a relatively expensive item, tell her the only way she’ll get it is if she saves for it. Of course, it always helps to have full cooperation from your extended family members at birthday time and during the holidays. A couple of years ago, when my daughter, Nina, was only 12 years old, she spent upwards of $300 for an iPod using money she had saved on her own. She was so proud of her accomplishment — as was I — that she shared her story on this blog.
Start a competition.
You can also take advantage of any sibling rivalry that may be bubbling under the surface by challenging your kids to see who can save the most money in a specified amount of time, with the winner getting a “savings bonus,” courtesy of the Bank of Dad.
Match their savings.
This strategy often works well with kids who prefer to spend their cash as soon as they get it. My teenage son still has trouble saving his income without a little encouragement, so I give both of my kids a little added incentive by matching their savings. By the way, it doesn’t have to be a straight dollar-for-dollar match — I often vary my kids’ saving bonus, depending on how generous I feel. For it to work, it just has to be irresistibly enticing.
When it comes down to effectively teaching your kids the benefits of saving money, there are lots of creative strategies you can consider. Just remember, whatever you do, make sure to save the economics lecture for high school.
Photo Credit: Alan Cleaver
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This is an updated version of an article that I originally wrote for Kiplinger.
One way we found by accident was finding money. We do live in the city, and this probably won’t work everywhere, you need a certain threshold of population before finding money is viable, also you need younger children. You can incorporate a competition who finds the most.
The benefits were surprising, rolling up the coins and depositing them taught them to count (by 1, 5, 10, & 25) and taught them the coins (and the few bills, though one day we found $104.00 – we did wait see if the owner returned and also tried to find the owner).
It taught them about banking and interest – we opened their own bank accounts for them to deposit their findings.
Once we started saying, you have your own money, if you want it, you can buy it, they started to immediately to price items not just in abstract dollars and cents but the time it took to get those dollars and cents (a long time when you are finding a quarter here and a dime there and lots of pennies).
We also found a surprising amount of foreign coins which we looked up on the map, so they learned some geography.
One those things that just happened, they got a lot out of it, but they also grew out of it.
More great ideas, Marc! Thanks for sharing them.
I really like the idea of matching their savings and am going to it a try. I have also been thinking about opening a bank account for the kids so that they get the banking experience. Has anyone done this? Can you share your experience if it had a positive impact on your kid?
I have saving accounts for my two kids. I have told them I will match them dollar for dollar if they use it as a college fund.
14 year has save close to $1000. 12 year old is around $600.
Good for them, John! Savings matches are a powerful incentive — at least they have been for my kids.
Our local credit union has a Youth saving account, and kids(!) up to age 21 are eligible. It pays 3% on the first $1,000 in savings, and there are no fees, plus the kids get an ATM card and electronic banking. Investigate whether your local credit union has a deal like this.
Very nice article for kids on saving money!
This grandparent started by saving all my change for my grand daughter. We began doing this when she was in primary grades. Then, she learned to separate the coins by value, count and list, and add to a total. Her mom opened a savings account for her by age 6-7? At age 13 she saves most of her babysitting money and must have well over $1000 put away. Maybe double that. She does buy things for herself once in a while, but she really enjoys seeing her savings grow. It all started out as a fun activity as opposed to making rules and setting limits, etc.
Fantastic, Paul! Your granddaughter sounds a lot like my daughter, Nina. She was always a prodigious saver, starting from the time she lost her first tooth and got money from the tooth fairy. Today she is 24 and I sometimes think she saves too much.