Sometimes I think I may be a little too aggressive when it comes to teaching my son to save money. From two years old I’ve been teaching him that when you get money you put it in your banks – one for saving, one for spending, one for giving and one for investing. Now when you ask him what you do with money he knows… one or saving… one for spending… you get the gist of it. He’ll be three in June. And when you ask him “where is the best place to go if you want money” he’ll answer “to work.”
It’s not all calculators and paychecks in our house though. I don’t want to be all business with him. But I could not imagine letting him leave the house without a respect for hard work and money and knowledge that money has multiple purposes. Same goes for my daughter, although she’s only 7 months old, so I haven’t started teaching her about money yet.
So when I stumbled on a guest post by Len Penzo over at Kiplinger a few weeks back that suggested five ways to encourage kids to save money, I had to share it with you. With the migration from blogger to wordpress the link got buried, but I dug it out last night so you could have a weekend to implement at least one of these strategies. Deal?
Implementing one of these a month can be a relatively easy way to make sure your kids don’t leave home without valuable lessons about money. And please don’t put financial education all on the schools. Teachers have 20 or more kids for six hours a day, five days a week. You have only your kids for the rest of the week. Let’s all agree to at least set a good example at home so we’re the last generation crippled by
stupidity debt. Another deal? Good.
Anyhow, let’s dig in:
Give them a magic money jar. Oooohhhh. I want a magic money jar! Basically the idea is to have a clear jug where they deposit change. When they have a buck or two you take the change and replace it with bills while they’re out. Pretty cool for sure. I like this idea a lot. Showing them that money grows is huge.
Teach them about compound interest. Len suggests talking with kids about the old “would you rather have half a million dollars now or a penny on day one and doubling it every day for a month.” (If you haven’t heard of this do the math. It quickly adds up to over a million bucks by the end of the month.). Once your kids get how the math works, explain to them that it’s because of compounding and that if they save and invest their money they’ll be able to have less extreme but similar results.
Set a goal. We did this a lot with my nephew growing up. We’d tell him that something cost $5 and that he could earn $1 per day if he helped clean something. He did, saved up the money and got what he wanted. As kids get older you can do this with more money and bigger goals. They’ll learn to delay gratification and that more work equals more money which equals more opportunities. And those more opportunities could translate into a quality mba online degree, without having to take out extensive student loans
Start a competition. What kids don’t love competition? Pinning one kid against the other for a savings goal is pretty brilliant. I mean, they’re going to compete anyhow, it might as well be over something positive…
Match their savings. The kids need to be a bit older for this one, too. I’ve tried it with my son and my nephew when he was five or six or so. Didn’t work that well. For younger kids I do something similar by telling them something is cheaper than they think so they can save up for it quickly. But as the kids get older, I love the idea of building in a rate of return for them.
Not bad, Len. Not bad. I’m really hoping my kids grow up to be respectful and responsible adults. And a big part of that is being wise with money, so they can concentrate on being a good Dad or Mom and on things that they and their families enjoy instead of whether they’ll be able to pay their light bill. So I talk a lot with my son about money.
What about you? Any kids in your present or future? Are you taking the lead on financial education at home? If so, what’s your best suggestion for getting a kid to become wise with money?
Until next time, put your credit card down and slowly step away from the mall!
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This was a guest post.