Kids who save become adults who manage money well

Primary school is all about learning the fundamentals — reading, writing and arithmetic — along with important life skills like saving. For kids, saving is a habit that’s as important as brushing your teeth and going to bed on time. Learning how to save teaches children the value of money, and how to plan and achieve goals. Even managing impulse control can be learned by saving for a rainy day. 

According to PBS news, kids as young as three can learn basic money concepts, so don’t hesitate if you want to start early. Saving also paves the way for greater financial literacy and becoming confident with more fiscal responsibility. Also, you’ll feel assured that your children will make wise choices with their money at each new stage of independence.  

Teaching children to save in five lessons

Lesson 1 – Openly discuss the concepts of money and saving

Money doesn’t need to be a taboo topic. Having ongoing conversations about the sources of money (income), how much things cost (spending), and how to budget are important tools for a financially fit future.

Having financial conversations can also lead to better decision-making and help teach accountability. Where should you start? Here are three ideas to kick off money conversations:

• As a family, develop a savings goal for something that will benefit everyone. Use a visual tool like a savings jar or a fill-in graphic so everyone can see progress and feel part of the larger goal.
• Approach money conversations with positivity. This helps kids think about what they value and teaches them about patience with their finances. Instead of saying, “We can’t afford it”, try saying, “That’s not how we choose to spend our money,” or “We can’t buy it now, but let’s figure out how to save for it.” 
• Talk about the behaviors that influence saving. Spending allowance money on immediate fun will get in the way of saving for a big goal. 

Lesson 2 – Discuss how money is earned

For younger children, most “regular income” comes from an allowance. For some, the allowance may be a set amount with no strings attached, while other families may structure it as a base amount with an ability to earn more by performing certain chores for the family. Other sources of income might include monetary holiday gifts, babysitting or lawn mowing. 

You’ll also want to explain how you earn money, the hours it takes, and the dedication required. Knowing that making money takes a lot of effort will help your children understand its value. 

The second part of the conversation is deciding where money will be saved. For kids under 16, a savings system at home will work just fine. For ages 16 and up, there are “starter” accounts that have a lot of benefits. At ANB, we have SafeSpend, an account with safety features that eliminate overdraft fees, monthly fees and surprise charges. SafeSpend also connects to our personal finance and budgeting app, ANB Go, which is money management mission control. Through ANB Go, parents of minors will be able to check in on saving and spending. 

Lesson 3 – Spending money: wants vs. needs

As a kid, wants and needs are easy to blur. From fashion to the latest games, a want can feel as important as almost anything else. So, this concept may take a little more time. 

Start by clarifying that a need is essential for daily living. Give an example like food, and let your child think of other examples like heat, shelter and clothing. Wants are everything else above the basics, like TV and movies. Then practice identifying wants and needs during the week. 

Of course, there are some grey areas to this. Yes, we all need clothing, but we don’t need the latest designer clothes. Talking about wants and needs could also lead to a conversation about saving for something that goes above a basic need. Maybe you can pledge a certain amount that you are willing to pay for an item, and if your child wants something fancier, you can create a plan for them to save the difference.

Lesson 4 – Set a savings goal and track the progress

A savings goal is a great challenge that demonstrates the value of sticking to a plan. For the first savings goal, have your child decide on something that is obtainable on a shorter timeline. Once the goal is determined, sit down and figure out how much money the goal costs and estimate how long it will take to achieve it.

Then keep track with a piggy bank or a notebook. A quickly achieved goal will build more confidence. If your child struggles, it creates another opportunity to talk about saving behavior or even adjust the goal. You may encounter frustration or impatience. Those feelings are part of the process, and it helps to tell your child that many people with a big saving goal have felt the same way. 

Lesson 5 – Be an example to your young saver

Kids often emulate what their parents or guardians do. If it’s important to teach your child to save, practice modeling the same behavior and habits you are teaching. Mention your grown-up-sized saving goal and what you’re doing to achieve it. If you’re craving a burger and fries, identify it as a want, and how having PB&Js at home will save money. Step by step, day by day, your child will catch on. 

Teaching kids to save matters

Learning how to save early can set the stage for improved financial success later in life (becoming more financially fit can happen at any age, too). It can be fun, rewarding and become something your kids get excited about. Plus, as you see your child learning, you’ll feel a sense of accomplishment, too.