Parents are playing a constant tug-of-war between letting their kids enjoy the freedom of youth and teaching them some of life's essential lessons. Of course, kids being as smart as they are these days, it's just a matter of time until they learn many of those lessons on their own. When dad stubs his toe on the couch and unleashes a verbal fury fit for a salty old pirate, they quickly understand that dear old dad is both imperfect and has quite a mouth on him under the right circumstances.
Still, a parent must equip their children as best as possible for the rigors of adulthood. Given the importance of personal finances, teaching a child the value of saving and healthy spending habits are lessons that should treat them well for the rest of their lives. Take a look through these tips to find something that will work best for you and your child.
1. An Old-Fashioned Piggy Bank
Some notions stand the test of time for good reason. The simple idea of the piggy bank is one of those very notions due to its convenience and straightforward concept. Let your child choose the piggy bank on their own to get them involved from the start.
Every time they receive a few dollars from Grandma or just find spare change in the sofa, encourage them to put most of it -- if not all of it -- in their piggy bank and let time work its magic. Once they see that they can eventually buy something substantial with what they've saved, they'll begin to understand the power and importance of money as well as modest spending to reach their financial goals better.
2. Don't Forget the Allowance
An allowance is another of those time-tested tools that teaches your kids not only about incremental, methodical savings over time but the importance of hard work as well. While it's probably not a good idea to task a toddler with cleaning the fine china, find age-appropriate chores they can do and pay them fairly for their efforts.
3. Monkey See, Monkey Do
As obvious as it might sound, leading by example is a potent tool in teaching your kids the importance of savings. Although the concepts of direct deposit and dollar-cost averaging might be above their pay grade, try using an old mason jar to store your loose change on a daily basis. Choosing a transparent container is important as it allows your child to see it gradually get higher.
Once it's filled, use the money for something fun, like a movie, so they can experience the benefit of all that time and diligence. Similarly, be sure to emphasize that, although easy to empty that jar to buy something you want, controlled spending along with consistent savings have their own rewards.
4. Open Their Own Account
Once your child is old enough and understands the piggy bank concept well, it's time to graduate them to their very own savings account. Although the principles remain the same, a basic savings account will also introduce them to our financial systems and institutions, emphasizing their importance in our everyday.
5. Establish a Budget
Around third grade or so, most kids should be able to start piecing everything together and form a budget. Using just a handful of simple line items, help your child track what they have, spend, earn, and how much they should have at the end of the month. This will introduce them to simple budgeting and forecasting tools that will undoubtedly pay dividends throughout adulthood.
While the many kid-friendly apps on the market can be very beneficial to further teaching about finances, make sure they have the basic concepts down first. Otherwise, it's too easy for a child to become enamored of market dynamics or their tablet rather than the valuable lessons you're trying to teach.
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