Before thinking of encouraging your child to open up a savings account under their name, check their level of understanding first. What is it that they do not understand about money? Is it about money itself or the things that they can do about money? The moment you pinpoint the value of money based on how it can be used, they will get the logic of saving for the rainy days. The truth is, there isn’t a bad time or good time to start teaching your kids how to manage their money well.
As parents, you can’t be around all the time for your kids to help them make financial decisions that could impact their future. Here are some of the top reasons why you should start educating them about money now:
5 Smart Ways to Teach Kids about Money
The ATM is not unlimited.
Online banking apps and bank statements can show how much cash is stashed and how much interest it has garnered since it got stored. This will make kids think that their parents can only get some dollar bills out of that ATM because they have money stored weeks or months ago. Once it is their turn to open up a savings account of their own, they will understand that for they have to keep the money in there for quite some time for it to earn interest, and they can’t just go about splurging it all on unnecessary things.
Some parents find the best savings account for baby early on and others have to allot some time for research. But if you’re really determined to help your kids make wise financial decisions, you will compare banks and the benefits that come with savings accounts such as top-ups or insurances.
Teaching kids about the limitations of an ATM (Automated Teller Machine) and the concept of money is an important lesson in financial literacy.
Here are some steps you can take to help teach your child that the ATM is not unlimited:
- Start with the Basics: Begin by explaining the purpose of an ATM. Let your child know that it is a machine that allows people to withdraw money from their bank accounts. Emphasize that the money in the ATM comes from their own account balance and that it’s not an endless supply.
- Introduce the Idea of a Bank Account: Teach your child about the concept of a bank account. Explain that people deposit their money into the bank, and the bank keeps track of how much money they have. This helps them understand that the ATM is a way to access their own money, not a magical source of unlimited funds.
- Discuss Withdrawals and Balances: Explain that when someone uses the ATM, they are making a withdrawal from their bank account. Emphasize that they can only withdraw the amount of money they have in their account. Introduce the idea of a bank balance and how it reflects the available funds for withdrawal.
- Use Real-Life Examples: Provide examples to help illustrate the concept. For instance, you can say, “If you have $20 in your piggy bank, you can only take out $20. You can’t magically get more money from the piggy bank.”
- Role-Play and Hands-On Activities: Engage your child in hands-on activities to reinforce the lesson. Set up a pretend ATM using play money and let your child practice making withdrawals. Show them how their play money decreases as they withdraw and help them understand that their account balance limits the amount they can withdraw.
- Set Limits and Establish Rules: Encourage responsible spending habits by setting limits and rules regarding money. For example, explain that there are daily withdrawal limits imposed by banks and that it’s important to spend money wisely.
- Discuss Saving and Budgeting: Teach your child about the importance of saving money and budgeting. Explain that money is a finite resource, and it’s important to plan and allocate funds wisely. Encourage them to set goals for saving and to make choices based on their priorities.
- Reinforce the Lesson: Whenever you pass by an ATM or discuss financial matters, continue to reinforce the concept that the ATM is not unlimited. Remind your child that the money they see in the ATM is theirs, and they need to make wise decisions about how they use it.
By taking these steps and having ongoing conversations about money and financial responsibility, you can help your child develop a better understanding of the limitations of an ATM and foster healthy financial habits from an early age.
Save now, buy later.
There are expenses at school that your kid can’t avoid like snacks or school-related projects. If some of them have experienced not having any money to buy a new pencil or pieces of bond paper because they “accidentally” splurged on the latest gadget, you can go the “I told you so” route and remind them about the importance of saving for more important expenses.
Teaching kids the concept of saving now and buying later is a valuable lesson in financial responsibility and delayed gratification.
Here are some tips to help you teach your child this important skill:
- Introduce the Concept: Start by explaining the idea of saving money for something they want in the future. Use simple language and relatable examples to help them understand. For instance, you can say, “If you save your allowance instead of spending it all right away, you can buy a bigger toy or something special later.”
- Set Savings Goals: Encourage your child to set savings goals. It could be for a specific toy, game, or activity they want. Help them break down the cost of the item and determine how much they need to save each week or month to reach their goal. This teaches them the importance of planning and patience.
- Use a Visual Aid: Create a savings jar or a chart where your child can track their progress. Each time they save money, let them add it to the jar or mark it on the chart. Seeing their savings grow visually can be motivating and reinforce the idea of saving for a future purchase.
- Offer an Allowance: Consider giving your child an allowance as a way for them to practice managing their money. Encourage them to allocate a portion of their allowance towards savings. This helps them develop the habit of setting aside money for later rather than spending it all at once.
- Encourage Delayed Gratification: Teach your child to delay immediate wants for future rewards. When they express a desire to buy something, discuss the option of saving for it instead of purchasing it right away. Help them understand that waiting and saving can lead to greater accomplishment and satisfaction when they finally get what they’ve been saving for.
- Be a Role Model: Children learn best through observation. Show them your own saving habits and explain how you save for bigger purchases or future goals. Let them see that saving is a normal and important part of managing money.
- Celebrate Milestones: When your child reaches their savings goals, celebrate their achievement. Acknowledge their effort and congratulate them on their patience and discipline. This positive reinforcement motivates them to continue practicing saving now and buying later.
- Involve Them in Purchase Decisions: As your child gets closer to reaching their savings goal, involve them in the decision-making process. Talk about the pros and cons of the purchase and help them evaluate if it’s something they still want or if they’d prefer to continue saving for something else. This teaches them to make thoughtful and intentional choices with their money.
Remember to be patient and provide guidance along the way. Developing the habit of saving now and buying later takes time and practice. By teaching your child this valuable skill, you are helping them build a strong foundation for financial responsibility and setting them up for a lifetime of wise money management.
They don’t have to fear missing out.
Kids tend to buy the latest Pokemon pencil case or the latest Pikachu phone cover because all of their friends at school have it. Then they realize that they still wanted to buy the latest console they saw on Amazon because the neighbors’ kids have them. Educate your kid that they won’t miss out on life’s best experiences even if they don’t get the same things as other kids.
Always remind your kids about their priorities. Let them choose: phone cover now or console a month from now? Kids are not as innocent as they seem, and if they can manipulate you into buying things they don’t need, they won’t give them value. Mom or dad can buy new ones after all, right? Also, they are convinced that they only want those things because they saw others having them and enjoying them.
Teaching kids about money and helping them understand that they don’t have to miss out can be done in several ways.
Here are some tips to guide you:
- Start with the Basics: Introduce the concept of money to your kids by explaining what it is and how it is used. Teach them about different denominations, coins, and bills. Help them understand that money is a tool we use to buy things we need and want.
- Provide an Allowance or Earning Opportunities: Consider giving your kids a regular allowance or creating opportunities for them to earn money. This allows them to have their own funds and make decisions about how to use it. It also provides an opportunity for them to learn about budgeting and making choices.
- Set Savings Goals: Encourage your kids to set savings goals for things they want. Help them break down the cost of the item and determine how much they need to save each week or month. This teaches them the importance of saving for something they desire and instills the value of delayed gratification.
- Teach Budgeting Skills: Show your kids how to create a budget by allocating money for different purposes such as saving, spending, and giving. Teach them to prioritize their spending and make choices based on their budget. This helps them understand that they can make intentional decisions about their money without missing out on other things they value.
- Teach the Difference between Needs and Wants: Help your kids distinguish between needs and wants. Discuss the importance of meeting basic needs first, such as food, clothing, and shelter, before spending on wants. This helps them prioritize their spending and make informed choices.
- Comparison Shopping: Involve your kids in everyday shopping activities and encourage them to compare prices and look for deals. Teach them the value of being a smart shopper and making informed decisions to get the best value for their money.
- Engage in Open Conversations: Have open and honest conversations about money with your kids. Discuss financial topics, such as budgeting, saving, and spending responsibly. Encourage them to ask questions and share their thoughts and ideas about money matters.
- Teach Generosity: Teach your kids the importance of giving and sharing. Encourage them to set aside a portion of their money for donations or charitable causes they care about. This fosters a sense of gratitude and empathy while also teaching them that money can be used to help others.
- Encourage Creativity and Resourcefulness: Help your kids find alternative ways to enjoy experiences or things they desire without spending a lot of money. Encourage them to be creative, such as organizing a fun activity at home or finding free or low-cost events in the community. This teaches them that they can have fulfilling experiences without always relying on expensive purchases.
- Be a Role Model: Set a positive example by demonstrating responsible money management. Show your kids how you budget, save, and make thoughtful spending decisions. This helps them learn by observing your behavior and understanding the importance of financial responsibility.
Remember to adjust your teaching approach based on your child’s age and level of understanding. By instilling these money management skills early on, you are equipping your kids with valuable knowledge that will benefit them throughout their lives.
The earlier they understand money, the better.
Some of the best savings accounts for baby have a clear-cut, easy-to-read money journal. So easy to read, even kids can copy the format used to monitor the cash flow. Knowing how much money is saved compared to how much money is spent helps children think twice about their next purchases. They become less dependent on you financially, and you boost their money-saving skills through monetized positive reinforcement.
Again, the earlier you expose them to these things, the more mature they will be in managing their money.
You can begin teaching your child about money as early as preschool age. While their understanding may be basic at this stage, it’s important to lay the foundation for healthy money habits and financial literacy.
Here are some age-appropriate ways to introduce money concepts:
Preschool (Ages 3-5):
- Introduce the concept of money: Teach your child about coins and bills, explaining their names, colors, and values.
- Play pretend store: Set up a pretend store at home with play money and items for “sale.” Let your child practice counting money and making simple transactions.
Early Elementary (Ages 6-8):
- Allowance and money jars: Start giving your child a small allowance, teaching them to save, spend, and donate a portion of it. Use clear jars or piggy banks to help them visually see their money grow.
- Identify different denominations: Help your child recognize and differentiate between different coins and bills, emphasizing their values.
Middle Elementary (Ages 9-11):
- Budgeting and goal-setting: Teach your child the concept of budgeting by helping them allocate their allowance towards different purposes, such as saving for a desired item or sharing with others.
- Encourage comparison shopping: Involve your child in shopping trips and show them how to compare prices and consider value for money.
Pre-Teen (Ages 12-14):
- Bank account and savings: Open a bank account for your child, allowing them to deposit their savings and track their balance. Introduce the concept of earning interest on savings.
- Discuss financial decisions: Involve your child in family discussions about financial decisions, such as budgeting for a vacation or making a major purchase. Explain the factors involved and the importance of considering trade-offs.
Teenagers (Ages 15+):
- Part-time jobs and income: Encourage your teenager to seek part-time employment to earn their own money. Teach them about income, taxes, and the importance of budgeting.
- Responsible credit card use: If appropriate, introduce the concept of credit cards and discuss responsible use, including the importance of paying bills on time and avoiding excessive debt.
Remember to adapt your teaching approach to suit your child’s age and comprehension level. As they grow, gradually introduce more complex money concepts and involve them in real-life financial decisions. By starting early and providing consistent guidance, you can help your child develop a strong foundation of financial literacy and responsible money management skills.
Make them feel excited about hitting goals.
Making your child feel excited about meeting money-saving goals can help motivate them and reinforce positive financial habits.
Here are some strategies to make saving money a fun and rewarding experience for your child:
- Set Achievable Goals: Help your child set specific and achievable savings goals that they can work towards. Make sure the goals are meaningful and aligned with their interests or desires. This will give them something exciting to look forward to.
- Create a Visual Tracker: Use a visual tracker, such as a savings chart or thermometer, to visually represent your child’s progress towards their savings goal. Display it prominently in their room or a common area where they can see their progress and be motivated by how close they are to reaching their target.
- Celebrate Milestones: Break down larger savings goals into smaller milestones. Each time your child reaches a milestone, celebrate their progress. This can be done through a small reward or a special activity that they enjoy. Celebrating milestones along the way helps maintain their enthusiasm and boosts their confidence.
- Offer Matching Contributions: Consider providing a matching contribution to your child’s savings efforts. For example, you can match a portion of the amount they save. This adds to their savings and reinforces the idea that saving is a worthwhile endeavor and that their efforts are recognized and rewarded.
- Make Saving a Game: Turn saving money into a game by introducing challenges or competitions. For instance, you can challenge your child to save a certain amount within a specific timeframe or compete against them to see who can save the most in a month. Offer rewards or prizes for meeting the challenge, such as a special treat or an outing.
- Involve Them in Decision Making: When your child reaches their savings goal, involve them in the decision-making process of how to use the saved money. Discuss various options and help them make informed choices. This empowers them to see the direct benefits of their saving efforts and reinforces their financial decision-making skills.
- Share Success Stories: Share stories or examples of other children or individuals who have achieved their savings goals and the positive outcomes they experienced as a result. This can inspire and motivate your child, showing them that saving money can lead to exciting opportunities or the ability to purchase something they truly desire.
- Encourage Peer Support: Encourage your child to discuss their savings goals and progress with friends or siblings. Creating a supportive environment where they can share their achievements and challenges can further boost their excitement and provide them with a sense of camaraderie.
- Provide Positive Reinforcement: Offer verbal praise, encouragement, and positive reinforcement when your child demonstrates good savings habits or reaches their goals. Recognize their efforts and express your pride in their responsible money management.
- Share Your Own Experiences: Share personal stories about your own savings goals and how you felt when you achieved them. This helps your child see that saving money is a lifelong skill and that everyone can benefit from setting and reaching financial goals.
By implementing these strategies, you can create a positive and exciting environment around saving money for your child. This will help them develop good financial habits and instill a sense of accomplishment and motivation that can extend into other areas of their lives.