Monday, June 2, 2008

Teaching Kids to Save

Many times, parents forget to teach kids important skills that they will need when they leave home. We are great for making sure that they know all the things they will need to know while they are still living at home - how to respect those in authority over them, how to tie their shoes, how to communicate effectively with peers - but in many cases, kids are never taught how to save money. This does not have to be boring. You know what your kids enjoy, so be creative and make it fun! Here are a few suggestions to get you started.

As soon as kids start earning money, they should start saving some. One way to do that is to set aside a certain amount. In my son's case, I decided how much he would save because he is still pretty young, but if your child is old enough to make an educated choice, let him decide for himself. The more choices you let you child make, the more he will enjoy the process.

When they have enough money to open up a bank account, teach them a few terms that they will need to know to pick out a bank and bank account. I will talk even more about that in next weeks' posts. Let you child do the work when she goes in to make deposits. When she can write well, let her fill out her deposit slips and talk to the teller. Make sure she knows that she is responsible for knowing how much is in her account and reconciling the statements. There may not be a way to make that part fun, but reconciling bank statements is just one of those things that everyone needs to do.

If you have the space, set up a "writing center" in your child's room where he can crunch numbers. One of the most fun aspects of saving money is watching it grow, especially when you factor in interest - extra money that he didn't even have to earn that he gets to add into his savings.

If she is old enough, let your child decide what the money will be for. I encourage you to make sure that it is for something worthwhile, not a toy that she will tire of in a month. I told my son that I he can decide what to use his savings for, but it has to be a major purchase - college, a down payment on his first house, his first car, etc. Money for toys has to come from his toy budget, even when he has to save up. In fact, I intentionally chose to pay him small amounts so that he would have to save his toy money.

I know it sounds dull and uninteresting to talk about from a kid's perspective, but something about earning your own money and watching it grow just grabs their attention and excites them. One day, they will be incredibly grateful that you took the time to teach them these important skills so that they can be intelligent and responsible in their financial decisions as adults.

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