10 Tips to Teach Your Child to Save Money

Every year, one day in April is designated as Teach Your Children to Save Day, a day that is all about enlisting parents to help their kids become money smart from an early age. According to a 2016 National Foundation for Credit Counseling survey, just 56% of adults give themselves an A or B when grading their financial knowledge, making the financial education of the next generation even more urgent.

Saving money is a habit that can take time to build, and even some adults have yet to master it. Consider this: Just 41% of Americans have savings set aside to cover emergency expenses, according to Bankrate. With that in mind here are some things you can do to get your kids—and perhaps yourself—on the saving bandwagon.

The first step in teaching kids the value of saving is to help them distinguish between wants and needs. Explain that needs include the basics, such as food, shelter and clothing, and wants are all the extras. You can use your own budget as an example to illustrate how wants should take a back seat to needs in terms of spending. 

Sixty-eight percent of parents said they paid their children an allowance in 2016, with kids earning $26.58 per week on average, based on six hours of chores. If you want your children to become savers, giving them their own money provides them with the opportunity to learn how to use it. When you offer allowances in exchange for chores, they’re also learning the value of their hard work. (For more, see: How to Use an Allowance to Teach Your Kids About Money.)

To a kid, being told to save without explaining why may seem pointless. Helping children define a savings goal can be a better way to get them motivated. If they know what it is they want to save for, help them break down their goals into manageable bites. For example, if they want to buy a $50 video game and they get a $10 allowance each week, help them figure out how long it will take to reach that goal, based on their savings rate. 

Once your children have a savings goal in mind, they’ll need a place to stash their cash. For younger kids this may be a piggy bank, but if they’re a little older, you may want to set them up with their own savings account at a bank. That way they can see how their savings are adding up and how much progress they’re making toward their goal.

Part of being a better saver means knowing where your money is going. If your children get an allowance, having them write down their purchases each day and add them up at the end of the week can be an eye-opening experience. Encourage them to think about how they’re spending and how much faster they could reach their savings goal if they were to change their spending patterns. (For related reading, see: 4 Easy Budgeting Techniques You Should Master.)

One of the reasons people save in their employer’s retirement plan is the company matching contribution. After all, who doesn’t like free money? If you’re having trouble motivating your kids to save, you can use that same principle to ramp up their efforts. For example, if your child has set a big savings goal, say a $400 tablet, you could offer to match a percentage of what he or she saves dollar-for-dollar. Alternately, you could offer a reward when your kid reaches a savings milestone, such as a $50 bonus for hitting the halfway mark.

Part of putting kids in control of their own money is letting them learn from their errors. It’s tempting to step in and steer kids away from a potentially costly mistake, but it may be better to use that mistake as a teachable moment. That way they’ll know in the future what not to do with their cash.

One of the basic tenets of saving is to not live beyond your means. If your child has something he or she wants to buy and is being impatient about saving for it, becoming your kid’s creditor can help to teach the value of saving. For instance, if your child wants to purchase something that costs $100, you could “lend” the money and require payment from the allowance you provide, with interest. The lesson you want to teach is that saving may mean delaying gratification longer, but the thing you want to buy won’t end up costing more you if you wait.

In a 2016 T. Rowe Price survey 44% of parents said they’d never talked to their children about the value of long-term investing, discussed market volatility or showed them financial statements. If you want kids to learn about saving, it must be an ongoing discussion. Whether you schedule a regular weekly check-in to talk about money or make money chats part of your daily round, the key is to keep the conversation going. 

In the same T. Rowe Price survey mentioned above, 17% of parents said they had zero savings for retirement, emergencies, college or other financial goals. If you want your children to become savers, being one yourself can help. Getting your emergency fund in shape, opening a 529 savings account or simply increasing your 401(k) plan contributions are all steps you can take to encourage saving as a family activity. You could also decide to save for something together, such as a family vacation or a pool.

Teach Your Children to Save Day only comes once a year, but there are lessons to be learned, for parents and kids alike, all year long. If you’re a parent, making saving a regular part of your child’s routine can lay the foundation for a bright financial future. The tips outlined here can be a good place to start. 

(For related reading, see: Teaching Financial Literacy to Kids.)