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On the Coast Magazine

7 Ways to Teach Your Kids to Save Money

01/07/2013 10:05AM ● Published by Nancy Babin

Your New Year’s Resolutions may include saving more money or not going into holiday debt this year. While you work toward meeting these goals, see them as opportunities to also instill better spending and saving habits in your children. These tips can bring the whole family together to save money and increase your accountability, so you won’t be wondering what happened to those resolutions next holiday season.

1. Set a good example.
Children pay attention to how you treat money, so it is important to have good habits of your own in place, including spending within a budget and saving. Use your daily activities to teach valuable money lessons. Talk to your child about where money comes from – work and earning it. While at the store, allow your child to help with the transfer of money for the items in the shopping cart. When at the bank, explain that this is the place where your money is kept safe.

2. Explain needs versus wants.
Discussing the difference between needs and wants helps your child learn the limitations of money and how we must make choices about the things we spend money on. Describe essentials such as food, clothing and shelter. Give your child the opportunity to talk about things they want but are not necessary. When shopping with younger children, explain why you buy certain foods like fresh fruit over cookies. For elementary age children, you can illustrate the limitation of money by drawing a circle and dividing it into parts for the different areas of your finances such as savings, housing, food and entertainment. Teens can list what they spend their money on to examine and reprioritize what is most important to them, whether it is saving for an iPhone, clothes or a gift for a friend. Regardless of their age, encourage your children to stop, think, and choose before deciding on a purchase.

3. Work together to set a savings goal.When your child first begins saving, keep it small and quickly attainable. Something less than $10 such as a book, going out for ice cream or a small toy can excite and engage children in elementary school. After your child meets one or two savings goals, introduce the concept of short-term and long-term savings. You can set another short-term goal for a large toy or special event ticket but also discuss long-term goals such as saving for college or a car.

4. Make saving visual.Use a clear container, whether a mason jar, Tupperware container, or piggy bank to save money in, so your child can see the money accumulating in the jar. You can also print out a picture of the savings goal or have your child draw the desired item. Then tape it to the savings container to remind her what she is saving for. To help your child see how quickly he is meeting his savings goal, you can create a chart to measure savings progress. The chart could be a sticker chart where you add stickers for a certain amount of money saved, a thermometer that your child can color with each deposit, or a colorful log of the coins and bills saved and what the new total is. Base the chart on your child’s capabilities and understanding of money.

5. Keep the process fun.Saving shouldn’t carry the feeling of punishment for kids. If saving is kept fun, it is more likely to become a lifelong habit. To show that saving money can be fun, involve your children in shopping for groceries and finding the best buys. They can look for the cheapest of a certain product on your list or search the Sunday newspaper for coupons of items they like. These activities can turn saving money into a scavenger hunt. You could even offer to add the money you save at the grocery store into their piggy bank. Another fun activity is to have your child build his own piggy bank. Okaloosa Saves hosts a piggy bank pageant at their annual Economic Living Expo which will be Saturday, February 3 at the Emerald Coast Convention Center. The expo will also feature fun money activities for children. To get more information on the piggy bank pageant, visit www.economiclivingexpo.com.

6. Incentivize saving.Offer extra opportunities for your child to save money. You can match your child’s savings contribution or even a percentage of it; this will illustrate the benefit of interest. With older children, you can explain interest and possibly even open a bank account. Look for a children’s savings account with no fees so it does not decrease your child’s savings. Even if your children receive an allowance, consider creating a chore chart that lists money to be earned by completing additional tasks around the house. Once your child completes the task, you can add the designated amount of money to her savings jar. Plus, it may just keep your house a bit tidier.

7. Let them make mistakes. It’s good for your children to discuss their savings goals and purchase decisions with you, but do not force them to follow your advice. Sometimes the best way to learn is through trial and error. If your son spends all his money on something other than the gumball machine he was saving for, let that be his decision. However, do not offer to purchase the gumball machine or loan him the money for it. It’s best to learn financial responsibility from mistakes at an early age with a small dollar amount than with large debts as an adult.
Money should not be a taboo subject. Keep money and what to do with it an ongoing conversation in your family. Once your child begins saving, introduce other financial habits such as earning and sharing. Continued openness about money will help your child develop into a financially responsible young adult.

Make Saving More ConcreteSaving money can be difficult, especially for big things like Christmas and college. A 2012 survey from Citi found that 76 percent of Americans say saving is very or extremely important; however, only 42 percent of people have a savings plan with specific goals in place, according to a survey by America Saves. Plus, 25 percent of Americans planned to put no money in savings in 2012. The following tips can help you start or stabilize some of your savings habits for Christmas and college.

Christmas

Many of us are feeling the post-holiday spending blues as the holiday excitement dies down and monthly statements arrive, whether from your credit cards or bank accounts. Take steps now to prevent feeling this way next year.
1. Set a holiday budget that becomes a savings goal.
Do this as early in the year as possible. Include how much money you would like to spend per person but also include estimated costs of decorations, travel, party supplies, and food. Be sure to reference what you spent in 2012 to create this budget.
2. Create an automatic savings plan.
You can have an automatic transfer go directly to your savings account, or for more discipline you can set-up a separate savings account. Ask your bank or credit union if they offer a Christmas Club account; this account earns interest throughout the year, and a check is automatically sent to you in November for the account’s balance.
3. Find ways to save.a. Collect spare change. Empty your wallets and pockets into a jar, and deposit the money into your holiday fund. Have your kids roll the money for a counting lesson; you could even offer them a commission that they can spend on holiday shopping.
b. Cut back on an indulgence. Maybe only get that coffee or cupcake every other week instead of once a week. Deposit the savings into your account. Buying two less Starbucks lattes a month would save you around $100 in a year. Just think, that’s not even giving up the habit completely!

College

For children born in 2012, the estimated average tuition for a 4-year degree from a public university will be $164,912 according to The College Board. That number can be overwhelming, so take a deep breath and remember that scholarships, financial aid, and student loans will likely be available to help offset some of that cost. Yet, it is good to think ahead, so you don’t face as much sticker-shock in the future.
1. Set a goal.
Determine what percentage of your child’s education you would like to fund and examine what monthly contributions would be necessary to reach that goal. Florida College Prepaid and The College Board offer easy-to-use calculators to estimate the cost of college and savings needed.
2. Select the best savings option for your family.
Prepaid plans, 529 college savings plans, and Coverdell Education Savings Accounts are just a few of the savings vehicles available. Research different savings plans available and discuss your goals and savings options with your financial advisor and tax consultant to see what best meets your family’s goals.
3. Start saving now.
Don’t dwell on the big numbers. Even if you cannot save as much as you would like, it is best to start saving now because the longer you save, the more money you will have to assist your child with college tuition. Saving $50 a month for 16 years could translate to over $13,000 at a modest interest rate.
4. Ask others to contribute.
To boost college savings, ask grandparents and other loved ones to donate to your children’s college funds instead of purchasing a plethora of toys for special occasions. It would save on space and extra clutter around the house as well as put some extra dollars back for college. Just be sure the money actually makes it to the college savings account.

ResourcesFor Parents
Sesame Street’s “For me, for you, for later” Program - http://www.sesamestreet.org/parents/topicsandactivities/topics/saveshare
www.Moneyasyougrow.org – a Presidential initiative that discusses financial lessons each age group should learn

Free Online Games for Kids
Practicalmoneyskills.com
Usmint.gov/kids/money
Richkidssmartkid.com

College Cost Calculators
Florida College Prepaid Calculator - http://www.archimedes.com/myfloridaprepaid/csp.phtml
The College Board Tools and Calculators - https://bigfuture.collegeboard.org/pay-for-college/tools-calculators

About the Author: Jennifer Tallman is a Banking Officer at Beach Community Bank and lives in Niceville with her husband. She enjoys helping others On the Coast, whether an area non-profit or local families. For her, saving is most fun when planning for a vacation.

Beach Community Bank - Fort Walton Beach, FL 

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