Achieving personal financial literacy is a lifelong pursuit - one that can most benefit us when we begin learning the basics as early as possible.
That's why, to get started on the right foot, it's important to teach your children about the value of saving money at a young age. It's been shown that a proactive savings education can lead to greater financial health later in life.
Reaching adulthood with a sound understanding of finances can even play a role in shaping our overall quality of life. Those knowledgeable about money may face less stress when dealing with complex situations like purchasing a home, starting a family and planning for retirement.
5 tips for creating positive saving habits with your kids
Providing financial education for kids doesn't have to be a daunting task, and it doesn't have to be completed overnight. Like riding a bike or fielding a ground ball, learning to save takes time, practice and a solid grasp of the fundamentals.
To help you get there, here are some actionable exercises you can experiment with to guide your children - from elementary age through the teenage years - in the right direction.
1. Practice everyday saving
The grocery store is the perfect setting to introduce the concept of spending and saving money because teaching moments are all around. Try creating a list together to practice avoiding impulse buying or using coupons to explain how discounts work. From everyday needs like bread and milk, to more occasion-based items like a Thanksgiving turkey, your children can experience firsthand the process of making basic financial decisions and the implications of every purchase.
2. Demonstrate how to set savings goals
While your kids are young and eager to learn, show them saving can, and should, be goals-based. Here's an easy way to start. Together, pick out a toy or some sort of treat - something that will generate excitement - and then physically set cash aside each week until you have enough to buy the item. Collect the money in a jar, a drawer or someplace safe where they can watch the amount add up over time and begin internalizing the value of savings goals. Kids form attitudes about money at an early age, so the sooner the better.
3. Begin budgeting basics
Of all the personal finance tips and tricks out there, learning to build and follow a simple budget may be the most beneficial. As your kids reach middle or high school, show what it means to plan for and track their spending. Together, add up monthly expenses and subtract them from their monthly income - that could be money coming from a part-time job and/or an allowance. What's left is the amount available to spend on other items. Whether they're saving for a class trip or simply want cash for weekend entertainment, understanding fundamental budgeting can go a long way toward building financial confidence.
4. Share your own savings adventures
Children learn by example, so when you model good savings behavior, they'll see what strong financial habits look like. For extra practice, you can even include them when making major purchases. Let's say you've saved $20,000 for a new car. Provide a budget and let them research options within your specified range. They'll feel invested in the process and, if all goes as planned, will begin developing good habits of their own.
5. Open a savings account
Savings accounts will hopefully be a part of your children's lives moving forward. So why not introduce them to saving through a bank now? Open an account and work together to monitor its progress. If you provide a regular cash allowance, consider allocating a portion directly into savings. Or, if your kids work a part-time job, encourage them to contribute to the account as much as possible.
While these tips represent only a small sample of how you can help educate your children, each is important for developing financial literacy. The more intentional you can be about teaching them to save in their formative years, the better off they'll be down the road.
When is the right time to open a savings account with your kids?
While every family's situation is different, there's never a wrong time to begin saving through your bank. Whether the goal is a car, travel, college or something beyond, saving for your children's future is always a good idea.
Are you ready to explore account options? A youth savings account can be a smart way to begin. Youth savings accounts are best suited for those 18 and younger and for parents whose children are interested in learning the basics of saving.
For kids 18 and younger opening a joint account with their parents, the following are required:
And for parents opening a youth savings account for a child, don't forget:
Talk to a banker about your goals. Your banker will be happy to provide more information about the savings resources available to you and your kids.