Each year, a day in April is referred to as “Teaching Children To Save the Day”. This day, April 22, 2021, is about helping children be smart with money from a young age. But if you have children in your life, every day should be dedicated to that. In fact, the month of April is dedicated to financial literacy and encourages people of all ages to expand their knowledge and practices regarding good money management skills.
Saving money is a habit that can take some time to develop. Some adults have not yet mastered it. As of November 2020, 63% of Americans were living from paycheck to paycheck with no savings to cover emergency costs. Granted, it was a particularly difficult year for many people to save this. However, it is helpful to go through the lessons and help your children learn the skills in good times and bad. With that in mind, let’s look at various steps you can take to get your kids – and maybe yourself – on a budget trend too.
Discuss wants and needs – A first step in teaching children the value of saving is to help them distinguish between wants and needs. Needs include the basics like food, shelter, basic clothing, health care, and education. Wishes are all extras such as snacks, film rentals and designer sneakers, a bike or the latest smartphone. Use your own budget as an example to illustrate how spending desires need to take a back seat.
Let them make their own money – Some parents reported paying their children a weekly or monthly allowance, which was often associated with household chores. If children can make and save money, they have an opportunity to learn how to use it. When an allowance is offered in exchange for chores, children also learn the value of their hard work.
Set savings goals – It may seem pointless for a child to save without explaining why. Helping children set a savings goal can be a better way to motivate them. Help them break down their goals into manageable steps. Help them plan how many dollars to save each week and how many weeks to reach their goal.
Specify a location – Once your kids have a savings goal in mind, they need a place to keep their money. For younger children, this can be a piggy bank. Older children may want help setting up their own checking or savings account with a bank. Developing a relationship with a local bank and learning how to manage your own account is a great skill.
Let them track the expenses – Part of being a better saver is knowing where your money is going. When children start spending and managing their own money, have them write down their purchases every day. Then, at the end of the week, have them add up their expenses. It can be an eye-opening experience. Encourage them to think about how they would spend money and how much faster they could reach their savings goal if they changed their spending patterns.
Offer savings incentives – One of the reasons people save on their employer’s pension plan is the company’s contribution. Who doesn’t like free money? If you’re having trouble getting your kids to save, you can use the same principle to step up their efforts. You can offer to match a percentage of the stored data. Or you can offer a reward when your child reaches a savings milestone, e.g. B. a $ 20 bonus for reaching the halftime mark.
Leave room for mistakes – Part of being in control of their own money is that children learn from their mistakes. It is tempting to keep children away from a potentially costly mistake. But it may be better to use this mistake as a teachable moment. In the future they will know what not to do with their money.
Act as their believer – One of the cornerstones of saving is not to live beyond your means. If your child has something they want to buy and is impatient to save for it, becoming a believer in your child can help teach a valuable lesson about saving. For example, let’s say your child wants to buy something that costs $ 100. You could “borrow” the money and ask for a payment from the allowance you provided with interest. The lesson you want to teach is that storing it can mean a longer delay in satisfaction, but the item you want to buy will cost less if you wait.
Talk about money – In the 2020 T. Rowe Price Survey, 40% of parents said they never discussed the stock market with their children, and 32% never discussed saving for retirement. If you want children to learn about saving, this needs to be an ongoing discussion. Whether you schedule a regular weekly check-in to talk about money or make money chatting a part of your daily round, keeping the conversation going is key.
Set a good example – In the same survey by T. Rowe Price, 23% of parents said they had no savings for retirement, emergencies, college, or other financial goals. If you want your children to be savers, being one yourself can help. If you want to get your emergency fund in shape, open a 529 savings account, or simply increase your 401 (k) plan contributions, there are all kinds of measures you can take to encourage family saving. You can also choose to save up for something together, like a big screen TV or a family vacation.
Teach Children Save the Day, comes only once a year, but lessons for parents and children are available all year round. If you are a parent, saving your child’s routine regularly can lay the foundation for a bright financial future. The tips listed here are a good place to start.