Teaching our Children to Save: A Priceless Life Lesson

3 04 2012

Featured on Blue Star Families

In a recent 2011 Teens and Money study*, 92% of kids want to learn about money management from their parents.  And,  81% of teen respondents said the best time to learn money management was during their school years, grades K-12.  However, according to survey findings, less than half of the respondents reported discussing money management with their family.

Being that financial literacy is not often taught in schools, parents are left being the ultimate teachers of personal finance to their children.  So, what are some ways parents can teach their children money management skills and the importance of saving?  Here are some tips for the toddlers, tweens/teens and young adults (the “T, T/T and YA”, respectively) in your life:

  • Discuss the Family’s Expenses [T/T, YA].  Discuss various expenses the family has as a whole.  Whether that be a gym membership, cable television plan, newspaper delivery or youth activities.  Explain how the expenses fit into the family’s budget.  Your children might just choose to cancel certain expenses in order to help the family save money!
  • Play a Game [T/T, YA].  Teach kids to understand what it means to live on a salary and pay expenses.  Grab index cards and write down a monthly income and various monthly expenses.  Lie the index cards out on a table and let the kids decide which expenses will be added or eliminated in order to balance their budget and live within their means.  Be sure to have an index card titled “saving” as an expense.  Kids should treat saving as a recurring monthly expense.
  • Take Them Food Shopping [T, T/T, YA].  What a great way to improve your child’s math skills and help them grasp the growing cost of food per month.  Show them coupons and explain how using them sheds money off the total bill.  Explain how the Commissary saves the average family 30% off their total bill because prices are based on the National Average.
  • Visit the Credit Union [T/T, YA].  Have an associate discuss with your child the meaning of interest rates and savings vehicles.  Visit other local banks to seek competitive interest rates.
  • Pay Them [T, T/T, YA].  Even at the young age of five, children will understand what it means to work and get paid.  Parents can start off with small household tasks like taking out the garbage, filling and emptying the dishwasher, making their beds or putting toys away.  Also, when the tasks aren’t completed they do not receive pay.
  • Mall Time [T/T, YA].  The mall is a great place to visit because of the mass of stores available to consumers in one location.  Talk about the varying prices from store to store, in-store promotions and window advertisements.  Discuss with them store credit cards and the hefty interest rates charged to consumers when bills are not paid in full.  Inquire within a store for their credit card applications and show your kids their advertised interest rates.
  • Car Dealerships [T/T, YA].  The third most expensive monthly expense faced by American families is the car payment (mortgage/rent #1 followed by food #2).  On average families spend $400 per month on vehicle notes.  For the teens in your life, see if the car dealership would discuss the pros of paying with cash for a used car versus financing a new one.
  • Browse Real Estate Ads [YA].  Point out the various prices for housing in the Real Estate section of your local newspaper.  Discuss renting versus owning, how prices are based on location, foreclosures versus buying traditional properties.  Military families should discuss the benefits of the VA Loan and the benefits of living on base versus off base.
  • Toddler Program [T].  Sesame Street’s First Steps to Spending, Sharing, and Saving is a bilingual multimedia program created to help families develop financial basics that will impact their children now and in the future.
  • Piggy Banks [T, T/T].  People respond well to visual aids.  The use of piggy banks is an excellent tool that demonstrates ‘seen’ achievement.  By seen achievement, I mean your children will notice the bank levels rise when money is dropped into the slots.  Many financial experts suggest kids have three banks – one for saving, spending and giving.  When kids perform chores and receive pay, they deposit money into their banks strategically.  This math lesson can include depositing 10% into giving bank, 10% into spending bank and 80% into saving bank. 
  • Lead by Example [T, T/T, YA].  As the 2011 Teens and Money study* reported, 92% of kids want to learn about money management from their parents.  If kids are noticing poor money management behavior from parents, they too may make poor financial decisions in the future.  Parents – lead by example.  Military Saves and Save and Invest are excellent resources for parents to gain financial know-how that can be passed onto their children.
  • Take the Initiative [T, T/T, YA].  You cannot get where you’re going if you’re sitting still.  The lack of financial literacy in school should prompt parents to educate their children about money management.  If parents were not aware, some banks will provide educational finance material for parents and teachers.  Many banks are happy to provide these items if available!  As a persoanl finance educator, I took the initiative and asked my local bank for educational material.  They provided me with activity workbooks, calculators and piggy banks for my students.

Teaching positive money management to children will shape their financial future.  It will provide them with the tools needed when they enter the workforce and deal with the daily handling and managing of money.  Wealth building begins at a young age and the power parents have to guide their children along the path of financial success is truly priceless.

*http://www.ja.org/files/polls/2011-Teens-And-Personal-Finance-Poll.pdf

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