How to Instill a Spirit of Saving in Children

As parents, we understand the value of saving. We also know that the earlier one begins to stash money away, the better off one will be in the long run. Teaching children financial literacy concepts and encouraging them to save early is key. How, then, do we instill a spirit of saving in our children? I’ll share a few ideas that have helped my children learn—and get excited—about saving.

Determine: The first step is to determine savings goals. Have conversations with your child regarding setting financial goals. Attending college? Purchasing a car? Saving for a school trip, a special camp, or a new gadget? Just talking about making plans will give them something to look forward to.

Visualize: Once your child has established their savings goals, focus on one of them and figure out how they will chip away to meet their goal. How many weeks of saving a certain amount will be required to reach their goal? Make a chart and mark their progress. As your child puts aside part of their allowance or paycheck in the bank every week, note it on the chart. This will let them see their progress as they work toward their goal. Even younger kids saving in their piggy bank can count out their money and see their progress. Both of these tactics gives kids a physical understanding of the amount of money that they are saving. Visualizing their progress makes it real for kids.

Example: Share a savings example with your child. In the scenario below, we start with a $100 initial deposit—perhaps this was a birthday gift—and then $40/month was added, perhaps from their allowance allotment. After three years, the account balance would equal $1,577 (principal: $1,540, interest: $37). The important message here is that continued saving pays off… and pays off nicely.

saving money

Parents can also lead by example in a couple of different ways. First, discuss your financial savings goals with your children. Bring it up naturally with kids during conversation, and share your thoughts on saving for retirement or other financial goals you have committed to. This way, your children will learn that there is a bigger picture to saving and that it is a lifelong endeavor. Another tactic is to let your child see you saving money. Tuck away your loose change in a jar while your child is watching and let them know that it’s your savings jar. This simple exercise shows how easy it is to save every day. Seeing is believing! If your kids see you saving, it will naturally inspire them to save.

Prioritize: There will be choices that your child will need to make along the way. For example, if your child gets a monetary gift for a holiday, birthday, or a special milestone, it might be necessary to prioritize where that money will go. Will they spend some right away? Or save it all? Help them divide up the funds they are allocating and contribute towards each of their savings goals. The key is to involve them in the process and let them have a say in setting priorities.

Reward: You can consider rewarding your child for saving their money, such as when they’ve achieved a specific savings goal. Treat them to a movie, dinner out, or something else they would enjoy. You can even consider matching their savings. This will motivate them to keep the habit going.

I hope that these ideas will help you begin to inspire a spirit of saving in your children. In sum, start slow, have fun with it, and the rest will fall into place!

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Written by Jan Combs
Jan Combs is a college finance expert at College Coach. Before joining College Coach, Jan was Director of Financial Aid at Harvard Graduate School of Education and Assistant Director of Financial Aid at Boston University.