Teaching children about finances is important and with so many kids at home right now, it might be just the right time to do so. Marshfield Medical Center Credit Union (MMCCU) is sharing tips to teach kids about different areas of finance.
From MMCCU: For our first topic, we’re featuring SAVING. Saving money is one of the most important aspects of building wealth and having a secure financial foundation. Here are five ways to teach your child about SAVING:
Start with a piggy bank
A piggy bank can be a great way to teach your kids the importance of saving, while giving them an easy way to do it. Tell your kids that the goal is to fill up the piggy bank with dollars and coins, until there is no room. Illustrate that the piggy bank is for saving money for the future and that the more they save, the more their money will grow.
Open a savings account
Once the piggy bank is full, take your child to the credit union to open up a savings account for them. Have them count how much money is going to be deposited, so they can have a physical understanding of how much money they have. Show them the final number and reinforce the idea of interest. It can provide a great source of motivation for your kids if they understand that their money will grow over time as long as they don’t touch it.
Utilize Savings Jars
When your kids really want the latest and greatest toy or a new action figure, let them know they will have to save up for it. Give them a jar for each of their desired purchases and offer them a small allowance each week in a denomination that encourages savings.
For example, if you give your child five dollars a week, give it to them in one dollar bills. They can save all their cash for one purchase, or they can contribute to different “jars” for various savings goals.
To encourage saving up for their short-term goals, put a picture of their desired toy or item on the jar, so they have a visual reminder of what they are working towards.
Create a timeline
As a kid, the concepts of money and time can be hard to grasp. Research has shown that the impact of a one hour financial lesson wears off after about five months. In order to make the message stick, money education should be timely and ongoing. If you know your child receives a $50 check for their birthday each year, the moment to talk about budgeting is right before receiving that check.
One way to keep money lessons ongoing is to create a timeline so that your child can visualize when they will reach their goal.
Let’s say you give them five dollars a week and they want to save up fifty dollars. If they saved one hundred percent of their allowance, they’d reach their goal in ten weeks, or roughly three months.
Start by getting a long piece of paper and a marker. Have $0 on one side and $50 (or whatever goal amount) on the other side. Create checkpoints on the paper for when they reach 25%, 50% and 75% of their goal.
Every time an amount is saved, draw a line illustrating how much was saved. Let your kids know that they will get small rewards at each checkpoint. Small rewards can encourage kids to keep going. Visuals are also helpful in illustrating their savings goals and how their money is growing.
Lead by example
Children learn by example, so the best way to teach your child about saving money is to save money yourself. Have your own jar of money that you put funds in regularly. When you’re out shopping, show your children how to discern between various prices and explain why buying one item makes better sense than another.
Reiterate the message that every time you get paid, you save a portion to help prepare for the future.
One of the most important things you can do is to start a conversation about money and the importance of saving. Money doesn’t have to be scary or a taboo. Use financial discussions as teachable moments. An innocent question such as “Are we rich?” can be answered in a way that emphasizes family values, such as hard work and responsible spending.
Let your children know they can have an allowance, but it’s up to them to save up for things they really want. In addition, illustrate how much their money can grow over time if they save.
Also discuss the difference between needs and wants and tell your children you are always open to talking about money and new ways to save. Ask them about what they want to save up for. Ask them what they want their future to look like.
Asking good questions can get them to think long-term and have a positive relationship with money.
Tips adapted from Wingate Wealth Management.