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Teaching kids to save money

teaching kids to save money
June 25, 2020

By Katie Levene

In a 2018 National Financial Capability Study, 58% of respondents said they were never offered a financial education by a school, college or workplace. This means that the majority of us learn how to manage our money at home from the people we trust most.

Teaching kids to save money can have a lasting impact on a child’s life. These seemingly small lessons will help them when they need to budget during college, save for a honeymoon and prepare for retirement. We share the lessons you’ll need to teach kids to save money so your child can go into the world as a savvy saver.

Start with a savings goal

For kids, time, money and savings can be hard concepts to understand. A visualization and short-term savings goals can help bring these concepts to light.

Together, pick an item or experience to work toward. (Studies show that we are happier when we spend money on group activities rather than a physical item. It may require some creativity, but see if you can brainstorm some fun experiences.)

Make the process fun by hanging up a picture of the goal and tracking the progress with a chart. Congratulate your child on every step toward their goal so the process is fun.

Move from piggy bank to bank account

When we think of saving our money, many of us think of the iconic piggy bank. However, many experts recommend a different take on the classic. So, where should kids save their money? Start with stashing your kids’ savings in a clear jar. This way, they can see their hard work add up. Then, around age 7, move those funds to a kids savings account. “Try opening a digital savings account so kids can see their hard work add up quickly via a mobile app,” said Sarah Hussain, product manager of deposit products at Alliant Credit Union.

Opening a savings account can be a big day for your child. Here are some steps to get you started:

  1. Show your child that some banks and credit unions are better than others. “You know that research is an important part of the buying process. So, pass that knowledge on to your little ones by comparing two kids savings accounts with your child and talk through the pros and cons for each,” said Hussain. Walk them through the different interest rates, fees and digital features.
  2. Walk through the application together. An application for a savings account may not be the most exciting thing to do with your children. However, letting them “help” you through it could give them a sense of ownership.
  3. Once you get approved, periodically check the account. Monitoring your account is an important lesson to share as well. Show your kids the interest rate and how much they are earning. If you stay excited, they’ll stay excited. Eventually, your conversation about interest rates could lead to conversations about investing and compounding interest.

Determine an allowance or income strategy

Your child will need a way to generate some income so they can build their savings. Birthday checks certainly help, but a semi-regular stream of money can be more productive.

A well-planned allowance

Allowances are a debated strategy among the parent blogs, but this monetary tool can be impactful. Many of the financial pros argue against an allowance not tied to work. Instead, they recommend implementing a regular allowance attached to specific chores.

“Before you start a program, consider the details of the allowance strategy so that the rules and methods are consistent. The stronger the plan, the more you can focus on why you’ve set up the allowance: teaching your children about how to save money,” said Hussain.

A savvy income plan

If you don’t want to implement an allowance plan in your household, help your child come up with some savvy business ideas. There are many opportunities for young entrepreneurs including the classic lemonade stand, mowing lawns or even gardening for neighbors and friends.

Help your child with a simple marketing plan and pricing their services. Not only will your child make some extra money, but they’ll also learn a little about how a business works.

Discuss spending on wants vs. needs

Good savings habits will help your child live below their means. Create a budget for kids who might be spending a bit more. By creating a budget, you can help them understand how to spend on the essentials, like food, back-to-school supplies, gas and clothing. When it comes to the remaining cash, you can discuss avoiding impulse buys and how to prioritize savings goals.

Let your kids make mistakes

I know, you’re thinking, “that’s easier said than done!” Hear me out.

We’ve all purchased something we regret, whether it was a treadmill we thought we’d use more or an investment that was too good to be true in hindsight. Now is a great time for your child to make mistakes because the stakes are low. If your child wants to spend their hard-earned money on a short-lived gimmicky toy, let them buy it.

Once they realize their purchase mistake, ask them what they’ve learned and how they can do better. Next time, should they research the product more? How can they remind themselves of their larger goals? What do they enjoy spending money on? Hopefully, when they spend their savings in the future, they’ll spend a little smarter.

Talk about money with your children

Throughout this exercise with your kids, reflect on your own saving and spending. If you want to do better, share that with your children and how you plan to improve. If you accomplish a savings goal, let your kids see your excitement and pride! Honesty and transparency will help both you and your kids grow.

If this conversation doesn’t come naturally to you, don’t worry about it! You’re not alone. In T. Rowe Price’s 11th Annual Parents, Kids & Money Survey, 50% of parents said they are reluctant to discuss money or financial topics with their kids. Here are some tips to help the conversation get rolling:

  • Start with your daily money habits. As you’re pouring your cup of coffee in the morning, mention why you make coffee at home. Or, if you are a regular at your local coffee shop, explain why that purchase is important to you and how your budget for it.
  • Shop together. At the grocery store, show your child the different prices on the shelf. Explain why you might pay extra for some items and buy the store brand for other items. Show them how to calculate price per ounce, and other measurements of value. Believe it or not, these small tips stick.
  • Talk about values. Many times, the way we spend and save reflects our values. Stress the importance of giving to charities and how you make decisions on purchases.
  • Share your hiccups. We all make financial mistakes. In fact, many psychology professionals say that parents and kids both benefit when a parent turns a failure into a teachable moment. Don’t be afraid to be honest with your children about finances and teach them about debt.

A conversation about saving doesn’t need to be a lengthy lecture. Rather, it should be part of an intentional routine with you and your kids. If you feel like you haven’t had a conversation about savings in a while, add a reminder to your calendar!           

Be a good example

As with anything, your kids will follow your example. If you don’t have an emergency savings account yet, create a strategy to start an emergency fund. If you have a chunk of debt you want to conquer, cut a few expenses and follow a plan for that too. Your children will see your hard work and will hopefully follow in your footsteps.


Katie Levene is a marketer fascinated with finance. Whether the topic is about the psychology of money, investment strategies or simply how to spend better, Katie enjoys diving in and sharing all the details with family, friends and Money Mentor readers. Money management needs to be simplified and Katie hopes she accomplishes that for our readers. The saying goes, "Knowledge is Power", and she hopes you feel empowered after reading Money Mentor.

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