Parents often ask me how they can get their kids (adult kids and grandkids too) to save money rather than spend it all. That would be a million-dollar answer – literally! Because saving is really hard today, whether you aim to save a million or not.
Learning to save is a habit that all kids should acquire. But how do you do it? Saving isn’t a natural tendency anymore, particularly when kids don’t see others practice that behavior much.
So sooner or later, desperate parents fall into the trap of bargaining with a non-saver or saying something like…..“If you save your money, you can buy XXX.” But isn’t that really spending too? Yes that’s delayed spending, but it’s also considered saving….specifically, saving for a short-term goal. And that’s a start. Having a goal to hit is a tangible way to develop a savings habit. To build on that, we also want savers to have long-term goals, like saving for a car, house or college.
Below, I suggest 7 ideas to get kids in the habit of saving the money they’ve earned or been given as gifts. But first, you should realize why saving is sooooo difficult for many today…
Why Can’t We Save?
- Spending starts sooner. Kids are developing the spending habit at a younger and younger age – access to gift cards, debit cards, online accounts, more mobility, and more disposable cash in their pockets fuel plenty of consumption early. Heck, even the tooth fairy brings bills instead of a dime or quarter.
- FOMO. “Fear Of Missing Out” favors buying over the delayed gratification of saving. Saving is just no fun when your friends are spending.
- Very low interest rates – still. Banks and credit unions haven’t paid much interest on savings accounts for years, so our incentive to save is just not there like it used to be.
- So we see no one saving. Overall, the U.S. savings rate has wallowed at an all-time low for several years…meaning adults and other role models aren’t saving either.
- Buy today! We live in a “gotta-get-it-now” culture with a disposable mentality, compared to years ago when families would reuse, recycle, wear out, buy used, and pass on “hand-me-down” items. When was the last time you darned a hole in a sock and then looked forward to getting new socks for Christmas?
Saving Is a Skill, Not a One-Time Event
When you’re aiming for kids to really sock away their cash long term and not just stash enough to buy yet another game app or trinket, you need to help them develop a habit. Here are 7 ideas you might try:
- Power of piggy banks. Our preschool kids used to love rifling through dad’s pockets for coins, discovering spare change in our sofa, and delighting when grandma “forgot” random quarters on the counter. Finders keepers….and into the piggy bank it went! It became somewhat of a game. When the piggy bank was full, we counted the change and took it to the bank savings account. Even teens and young adults like to stuff piggy banks (or jars, plastic cartons, cans), so piggy banks can work for many years.
- Sock it away ASAP. When I started babysitting as a young teen, I came home with cash in my pocket and spending plans in my head. I usually had a hard time deciding, so my wise mom would offer, “Hey, I’m headed to the bank, so why not come with and put that money in your account? You can get it out whenever you decide what to buy.” You know, I usually just didn’t get around to going to get the money before the next babysitting job. And, once I saw how fast it was accumulating, I really wanted to keep it growing, and spending it didn’t seem so attractive.
- Sweeten the pot. Banks pay practically no interest – but you can. As your kids start earning money, try offering them extra incentive to save it. Don’t know how much to pay out? Well if the bank is paying interest of .25%, that’s a mere quarter earned for every $100 in savings. I’m sure you can add a sweeter, more enticing reward ; )
- Swap it out. Having ten $1 bills makes it so much easier to take a couple to spend, just in case. But having the $10 bill often delays the spend and that $10 stays put. As a parent, try exchanging the single bills for a larger one to stash away. We were surprised at how often this worked with our kids.
- Keep the change. Choosing is hard, don’t we know it?! So when our young consumers would agree to the less expensive of two choices, I offered a “Keep the Change” reward and gave them the difference to bank.
- Random acts of savers. Ever notice that complimenting a teen or ‘tween often encourages more behavior of the same? When you notice traits you want to reward, give your kids a bit of extra cash. You’ll love the win-win…acts of kindness plus a savings habit too.
- Talk the walk, walk the talk. Talking about money with your kids and letting them see how you save too is powerful. That doesn’t mean you have to lecture about the economy or go overboard on showing them how you stash away a nest egg. But the more often, the better. And, since handling money is likely something you do most days, you can work money moments into a variety of ordinary conversations…chat about shopping, groceries, school lunches, sports, ordering pizza, buying a present, a friend’s money mistake, your job, cost of a pet, vacation choices, getting a car, borrowing or lending money, etc.
What Age Should You Start?
Toddlers and preschoolers: Kids as young as 2 or 3 can recognize coins. Make it a game to drop them in that piggy bank, stack them, sort them, roll them, play a matching game or do hide-and-seek with quarters. For those ready to start counting, pennies are the perfect item to tally!
Ages 5 to 8: Early elementary students are more likely to understand money concepts when the conversation is not too abstract. For kids who count well, it’s time to start counting by fives or tens, making change for a dollar, and talking “greater-than” or “less-than” amounts. Those who understand that money has value are ready to do household chores in exchange for earning cash. Offer monetary rewards for helping younger siblings, sharing with another, or doing chores for you. (It’s that “random-acts-of-savers” thing I mentioned above.)
Ages 9 to 12: Young consumers this age like spending – and acquiring money. They usually get excited about doing a lemonade stand or if a neighbor or relative wants to pay them to do a chore, like walking the dog, weeding a garden, or picking up their mail for a few days. (You can encourage your kids to see that helping others isn’t just about getting paid, but also about helping a friend, learning new skills and being kind.) This is a good age to introduce comparison shopping, such as between similar items at the grocery store or between brand names and generic items. If you can allow a choice between two similar items, this is the perfect age to promote the “Keep the change” offer for their piggy bank, as mentioned above. And, it’s time to open a savings account for each kid, if you haven’t already.
Teens: Before young teens or ‘tweens have a chance to cash that first paycheck, set up auto-pay to send some to their savings account. Help your teens create their savings plan with short-term and long-term goals. (Of course, your goal is setting them up to make saving a lifetime habit.) A savings plan includes what you’re saving for, how much you need to save each payday, and how long you must save to reach your goal. Incidentally, savers with a plan are more than twice as likely to make good progress to meet savings goals and reduce debt, according to research from America Saves and the America Savings Education Council. You can also help a teen set up a budget, or spending plan so he/she knows where the money is going.
Do you have other suggestions that worked in your family?