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So, it has been a while since I wrote on how to teach children good financial habits, but I thought I should pick up where I last left off and (hopefully) wrap up the series soon.
Today we will discuss saving. This is an easy one in my book and one that many of you across Blogland are already doing, as I have already read.
Start by setting up separate containers for the areas you want to focus on. They can be anything...a mason jar, a cleaned peanut butter jar, an old icing/frosting container...whatever you want. Let the kid decorate it with some guidance. Give each one a theme. For older children, have them decorate with the theme of what the money will be used for--for instance a present for "giving," a safe or lock for "saving," and dollar signs for "spending." With older children as well you can mark the percentage on the container to help with some math education. For smaller children, color code the jars--like green for saving, red for spending, and purple for giving...something that they can relate to if they cannot read. Use different "red" objects and glue on the outside of the spending jar just to make it interesting to create and to look at. Make the system work for you, but make it fun for them. Give them something to really be excited about.
When you child earns/receives money, do what you can to divide it up for them into equal amounts in order that they can "budget" their money based on percentages that your family has determined--for instance 10% giving/30% spending/60% savings or however you want to divvy it up. I will use this 10/30/60 model for my examples because I think that is a pretty good way to do it, however, feel free to use whatever percentages with which you are comfortable. Say they have "earned" $1 for doing a chore that you asked them to do. Pay them in dimes. I know, this is a hassle for you, but it will pay off in the end. Teach them that one of those dimes goes into the 10% Giving jar, three go into the spending jar, and 6 go into the savings jar.
Now make sure that either once a week or once a month, depending on how often you tithe/give, you take out everything in the "giving" jar and contribute as you have set it aside. Make this important to the child. Make them see you do it...or even help you with it if at all possible. I covered giving more in a previous post in this series and you can read more about it here.
Also once a month, move all of the money from the "savings" jar into an actual savings account for the child. That way, it can accrue interest. Each month when you are ready to deposit the money, go online to the account and show the child how the previous month's deposit has grown due to interest. If you have already taught you child about credit using my method, they will already understand interest...except this time, it is working in their favor! Let them see the account again once you have made the deposit so they can watch their money grow. Even print up the chart or graphs that some banks offer from their sites so they can have a visual (if they are geared that way) --or make your own charts in Excel.
Lastly, once a month, also cash out the spending jar. Turn those coins into cash just to save room in the jar and reduce its weight. You can decide once a month to go on a "shopping" trip to let them spend their money or let them access it whenever they go shopping with you...whatever you prefer.
One more note--if need be, create a new jar if you have a special event coming up...like a vacation. Have them take some of their "spending" money and put it into the special event jar to spend on that occasion. Make sure that they understand that they will have less spending money immediately, but will have some especially set aside for those special occasions that are upcoming. Do not compromise and let them take some of their giving or savings money for this. You can set the best example by teaching them to buy less now and be frivolous with that money later than to dip into money that is set aside for giving or spending, neither of which should be compromised.
Whew...did you know that there was so much to cover? Just put it in the piggy bank, right? That might work, but it will not teach them realistic, applicable money management.
Photo credit: -murilo-