Why Saving at a Young Age is Important – and How to Empower Your Kids to be Money-Smart
Most Americans feel that they waste a considerable amount of money each year, and unsurprisingly, one of the biggest culprits of excess spending is — you guessed it — gifting. This issue is magnified for parents. Get this: the average parent will spend $422 per child this year on holiday gifts alone, and those gifts will sit largely untouched. In fact, most children play with fewer than 4 of their toys. Knowing that, it’s pretty easy to conclude that there are probably better uses of money spent on kids’ gifts – and missed opportunities to teaching kids to save money.
Financial literacy is a valuable skill at any age, but it can be an intimidating and elusive concept. Teaching kids to save at a young age builds healthy financial habits and imparts smart money lessons they can carry into adulthood. One great way to mitigate wasteful spending and teach kids to save is through practices like group gifting. Presently is a group-gifting platform that helps people focus on fewer better things and empowers them to put excess gift funds into savings that support the recipient’s future.
One great way to mitigate wasteful spending and teach kids to save is through practices like group gifting. Click To TweetNow’s the time to start teaching kids financial education so they grow into young adults that are mindful of their spending and make smarter decisions about their future. Check out the seven healthy habits below to teach your children how to be financially responsible when it comes to saving.
But First, Why Kids Should Start Saving Young
Teaching kids to save money has many benefits beyond just funding a college degree or retirement – which for kids can feel like a long way away! It can help kids understand the value of money, as well as teach them to weigh various tradeoffs and build a plan toward achieving a goal. While saving for retirement might not be top of mind for the average five-year-old, that shiny new toy or game console is! This is a great opportunity to teach kids how their piggy bank can grow to afford them the things they want in life.
Savings can help kids understand the value of money, as well as teach them to weigh various tradeoffs and build a plan toward achieving a goal. Click To TweetAdditionally, starting young means that the money has more time to accrue interest, which is money that the bank pays you each month on the money you’ve deposited. And the more you save, the more your savings can snowball and grow!
Finally, getting your kids to start saving young is a direct investment in their future. Currently, 23% of Americans do not have emergency savings. In fact, one in three Americans have less than $5,000 in savings and one in five have no savings at all. While your child may not have to worry about unexpected occurrences now, it is still a great opportunity to teach them how to save if their future car breaks down or if Fido hurts his paw.
7 Tips to Enforce Healthy Savings Habits from a Young Age
1. Teach kids that money is earned, not expected
Teaching the value of a dollar and hard work is an important lesson to teach kids of any age. If Sally wants a brand new game console, it can be a valuable experience to both let her know how much it costs and empower her to try to earn it over time, rather than to expect it. This can be taught in the form of rewarding them for household chores, helping them build their first lemonade stand, or even interviewing for an afterschool job as they get older. Not only does earning the money to buy their dream gift teach kids how to set and work toward goals, but it also can help kids appreciate their toys more because they’ve worked hard to earn them.
Not only does earning the money to buy their dream gift teach kids how to set and work toward goals, but it also can help kids appreciate their toys more because they’ve worked hard to earn them. Click To Tweet
2. Present kids with tradeoffs and let them choose
Aside from teaching kids to save money, opportunity cost may seem like a sophisticated concept for children (and adults), but learning about it can help kids weigh the decision of buying one item over another and understand the possible outcomes. For example, have them consider that if they spend money on that video game, they may not have enough money to also buy the dollhouse.
3. Make savings visual with a (transparent) piggy bank
For young children especially, seeing money accumulate as it is earned (and disappear when it is spent) can be a great way of teaching kids to save money and enforcing money management. This can help children understand that money is not infinite and that it can grow or shrink based on decisions to save or spend. This can be visualized with a digital piggy bank or a physical one.
4. Teach them how to budget to turn saving into a habit
We’ve all heard the expression, “Don’t spend it all in one place!” Rather than spending all of grandma’s birthday cash or money earned from chores, help your kids create a budget and determine how much to allocate toward savings versus ice cream and movies. As your children grow up and become more independent, it is extremely valuable to get in the habit of budgeting income so they can save for their future.
Rather than spending all of grandma’s birthday cash or money earned from chores, help your kids create a budget and determine how much to allocate toward savings versus ice cream and movies. Click To Tweet
5. Let them take responsibility for a bank account in their teenage years
Great job for teaching kids to save money! When your children reach a certain age, let them manage their own money in a bank account. Remember those summer jobs we mentioned before? Setting up a basic savings or checking account allows your child to deposit their money as it accumulates. Help your children learn the basics of account management, too. This will be valuable when they are managing larger sums in the future. The world of brokerage accounts and retirement funds would be overwhelming without the foundational knowledge of basic savings accounts during their teenage years.
6. Celebrate milestones – big or small!
Reward your children and offer them praise when they reach certain dollar amounts in their savings account, or when they show responsible habits like waiting to buy something until they have enough money saved to do so comfortably. Keeping score, giving rewards, and having an accountability partner are some great ways to help build healthy habits. Using positive reinforcement with your children accomplishes all of these things and sets them up to build healthy financial habits early that will last a lifetime.
7. Stress the importance of giving
Once your children begin to start making a little money — whether through chores or a summer job — make sure to emphasize giving. Let your kids pick a charity or cause that is important to them. Allow your child to contribute to something bigger than themselves, and eventually, they’ll learn that giving doesn’t only benefit the recipient, but the giver as well.Allow your child to contribute to something bigger than themselves, and eventually, they’ll learn that giving doesn’t only benefit the recipient, but the giver as well. Click To Tweet
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Get started by group gifting
Get started on teaching your kids about savings as soon as their next birthday or holiday by setting up a group gift on Presently and empowering them to pick one gift and decide how they want to spend or save the rest. For more great tips, check out Dave Ramsey’s blog on 15 Ways to Teach Kids About Money.
Presently is a group-gifting platform that gives people an easy way to contribute to a single gift, together. Designed for kids and adults alike, Presently enables communities to gift better, choosing quality over quantity. Organize a group gift here.