Kids who learn how to save at an early age have a big advantage over their peers.
This doesn't happen automatically. Parents and caregivers play a huge part in helping children to head in the right direction.
Here are some tips to help kids learn to save money — whether they are starting with their birthday gift, a first paycheck, or even finding some change between the couch cushions.
1. Talk to your kids about money
Before your child makes any moves with their cash, the first step is to talk to them and ask what money means to them. By asking how they want to spend their funds, ask how much money they would like to spend versus how much they would like to save. For the money that they're saving, ask them what they are saving for. Encouraging children to think about these questions can help empower them to successfully manage future money.
2. Find a strong savings account
Open a savings account that can earn interest and watch their balance grow over time. If kids see that they can earn interest on their balance, they will start to understand the concept of compound interest at a young age. And parents, you don't have to limit yourself to an account that is marketed only to kids. Some of the best savings accounts are high-interest-earning online accounts that have low fees. And many financial institutions let caregivers open an account in their own name for a child, even an infant, so it's never too early to save!
3. Encourage goal-setting
Once an account is opened, you can help your child think about planning for the future. Goal setting is important because it helps kids learn the importance of delayed gratification. If kids learn to set goals and accomplish them after delayed gratification, they will have a better understanding of the value of their purchases. This is particularly important due to the nature of spending temptations children are likely to experience in the next few years.
4. Pair smart saving with smart spending
Part of teaching kids how to save money is to watch how they spend it. You can do this by giving them a savings account with a mobile-focused spending account or an app that offers debit cards, budgeting features, and the ability to let a parent monitor and limit the spending. Many top savings accounts have mobile apps to help parents and kids keep tabs on their growing money. Savers can also track progress with a savings goal calculator.
This feature allows children to experiment with money and enforce limits which help them manage their spending. When kids (and adults) have a sense of control over spending, they often find it easier to reach their savings goals.
Helping kids learn how to save money is an important part of teaching personal finance. It can allow kids to feel comfortable with money while teaching them how to balance spending money on what they want now versus saving for the future.
