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11 Ways to Teach Kids How to Save Money

By Miranda Marquit

boy money billsMy son loves saving money. He loves to watch the pile of coins and dollar bills grow in his big, re-purposed pickle jar and he loves emptying out this ceramic “cash cow” to take his money to the credit union – and receive a prize.

Watching his money pile grow and receiving prizes are two things that inspire my son to save. But there are additional ways to motivate your child to start saving.

The most important thing at the beginning is to make saving fun. Plus, the earlier you start teaching your children to save money, the better off they’ll be. Even toddlers can do it, but you have to teach this concept in a way they’ll understand. Then, as your children grow, you can introduce more sophisticated saving strategies.

Here are a few ideas to teach your children to save money at any age.

Making Saving Fun for Young Children

My son was introduced to saving as a toddler. We didn’t use money at first, and in fact, we weren’t even trying to teach him about money. What we had was a reward system for watching TV based off of coupons. He could earn “coupons” that could be exchanged for TV time and we labeled each of our DVDs with the number of coupons he needed to watch them.

young boys piggy bankThe short episodes of “Berenstain Bears,” for example, required one coupon, while the long “Incredibles” movie required four. Pretty soon, he caught on that if he wanted to watch a longer movie, he needed to save his coupons. Then, when we started paying him an allowance around the age of five, my son easily understood that he could spend and save his money like he could his coupons.

When it comes to learning concepts like saving, visuals and physical interaction are important, especially for young children. With that in mind, here are a few ideas to teach your child how to save:

1. Use Different Envelopes/Jars
You may be familiar with the envelope budgeting system for your own money, but this can also work for children. On either envelopes or jars, have your child draw pictures of what he or she wants. You may also want to help your child understand that some items will take longer than others to save for.

For example, the short-term savings container might have a picture of a specific toy, while the long-term container might have a picture of a trip to Disneyland. Teach your child to set aside money for short-term and long-term goals, and have another container or envelope for spending on everyday items.

2. Make a Savings Goal Chart
Once you know what your child wants to save for, figure out how many weeks it will take and make a chart. You can represent each week with a box and your child can put a sticker in that box once the money from that week’s allowance is set aside.

We did this with my son, and he put a picture of the Transformer toy he wanted on the chart. We figured out how many weeks of allowance it would take to save up (after his long-term savings and church donations were taken out). Every time he received his allowance, he would divvy up his money and put a sticker in a square (he loved stickers at the time). This way, he could see himself getting closer and closer to his goal.

3. Offer Rewards for Saving Money
Consider rewarding your child for saving his or her money. Much like my credit union, which offers t-shirts and other prizes, you can offer prizes to your children.

For example, if your child doesn’t spend any money for a certain amount of time, provide a small reward or treat. You can also make the prizes better the longer your child saves. Try stickers, an extra 1/2 hour of video games, toys, or whatever motivates your child.

4. Set a Good Example
One of the best things you can do is let your child see that you save money too. Put money in a jar while your child is watching and tell him or her it’s your savings jar. This will show your child that saving is “normal.” Plus, since most young children want to be like their parents, seeing you do it will provide them with money lessons that further inspire them to save.

5. Match Your Child’s Contributions
A “savings match” can be a great way to encourage your child to save extra money and get an early peek at the benefits of a company match for a retirement savings program like the 401k. While we have a standard amount my son is required to set aside from his allowance, if he chooses to save more, we match it.

girl piggy bank

Helping Older Kids Practice Saving

As your child gets older, a goal chart may be less inspiring, and drawing pictures on an envelope tends to lose some of its charm. However, you can still set an example of saving and you can still match your child’s contributions. Plus, it’s always a good idea to have different envelopes, jars, or accounts for different purposes.

As your child grows, here are a few more ideas to teach him or her about saving:

1. Open a High Yield Savings Account
When your child is old enough to understand the concept of interest, you can look for savings accounts that earn interest. Help your child open a high yield account online and explain the importance of compound interest. Ally Bank and Capital One 360 are good options.

2. Help Your Child Prioritize
Have an older child write out a wish list of things he or she wants to spend money on and prioritize that list. Ask your child to think long-term as well. How about a nice laptop for college, a graduation trip to Europe, or even the down payment for a house someday?

Then, have your child allocate an amount of their allowance, or “income,” to each goal. These are the beginnings of a financial plan and this type of thinking will serve your child well in the long run.

3. Let Your Child Make Mistakes
Sometimes the best lesson comes from a poor decision, especially when your child is young and the financial loss won’t be so great.

When my son got his birthday and Christmas money last year, he rushed out and spent it without thinking. After spending most of it, he realized that he didn’t have enough to get the video game he wanted. He wished he had thought about it first before he spent it. But now, he saves up for the things he really wants and thinks before he spends.

4. Play Games
There are a number of games available to teach financial concepts to children. Monopoly and The Game of Life, for example, can teach money management skills as well as the importance of planning ahead. Rich Dad Cashflow for Kids is another good option focused on money management.

My son’s first move in Monopoly is to set aside enough money to buy Boardwalk so he is prepared if he lands on it. In addition to classic games related to money that you can use as family game night ideas, there are a number of online games as well such as Rich Kid Smart Kid.

See this list of kids educational websites for learning about money.

5. Talk About Money
While you may not want to discuss your salary in front of your children, you may want to let them hear you discuss your financial plan and the arrangements you’re making for retirement, for example. This could simply be having a conversation with your spouse while your children are in the room. In this way, your children can understand that saving is a lifelong endeavor.

6. Look for Good Deals with Your Children
One of the keys to saving money is looking for deals on purchases. When my son saw a book he wanted at the grocery store, my husband suggested we go home and look online for a better price. Together, they compared prices on different websites and even considered purchasing the book used.

Now my son loves looking for deals. He even reminds us sometimes to comparison shop before we pull the trigger on a purchase.

Final Word

Teaching your children how to save is an important step to prepare them for financial responsibility and a secure future. But it won’t go very far if you don’t “practice what you preach” and save for the future yourself. Whether we like it or not, most of us take after our parents and emulate the habits we observed in them during childhood. In other words, you need to act how you want your children to act when they grow up.

What are some of the most effective methods that you utilize to help teach your kids about saving money?

(photo credit: Shutterstock)

Miranda Marquit
Miranda Marquit is a freelance writer and professional blogger specializing in personal finance. She writes for several web sites, and her work has appeared in numerous online and offline publications. You can find Miranda's personal finance blog at AllBusiness.com.

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  • http://www.savingstoolbox.com/ Savings Toolbox

    I like the idea of a “401k” plan for kids. Especially if it’s to help save for something they want, like a new car or a new computer.

    • http://www.mirandamarquit.com Miranda Marquit

      It really can help them learn the importance of taking advantage of matching contributions. Teach them not to leave free money on the table.

  • sandrar

    Hi! I was surfing and found your blog post… nice! I love your blog. :) Cheers! Sandra. R.

  • Charissa Arsaoui

    I had a paper route in my early teen years. My mother and I set up a savings account in my name with this purpose in mind. I still have this account. My parents stressed the importance of saving up for big ticket items like clothes, cars, and vacations. My brothers and I actually paid for a week long trip to Colorado with our paper route money.

    • http://www.mirandamarquit.com Miranda Marquit

      That’s great that your mom taught you the value of hard work. And what a fun reward! I think kids really need to be rewarded by being allowed to pay for something they want with the money that they earn.

  • http://twitter.com/SquarePennies Maggie@SquarePennies

    These are terriffic ideas! Thanks so much! I’m forwarding this to help wih my grandkids!

  • Anonymous

    What a fabulous list of ideas!! I use the three piggy banks with my kids. We don’t tithe but we pick a charity to help out, currently it’s The Ronald McDonald House.

    I like the idea of matching anything extra they put into his savings. I think I’ll start doing that myself.

    My 5yr old still doesn’t have the concept of money, he keeps wanting to give it to me to help pay me out financially. But I think the coupon for tv time may work well for him.

    • http://www.mirandamarquit.com Miranda Marquit

      Anything you can do to get them used to concepts related to money is a good thing. That’s cute that your son wants to give you money, though. Generous instincts!

  • http://www.savings.com/blog/blog.html Amy Saves

    my child saves money for “big” items that she wants, be it makeup from sephora or a new outfit. she’s also big into using coupons, since who doesn’t want free money?

    • http://www.mirandamarquit.com Miranda Marquit

      Coupons already? That’s pretty good Great job, mom!

  • Nate @ Vertex42

    Making a savings goal chart is very helpful. We use Vertex42′s Money Manager for Kids template to help them save money. I like your #3 idea in giving a reward. That could be a way to get them motivated.

  • Millus

    Thanks for a great list of ideas! When I was a kid, my father used a lot of similar methods teaching me about money. I have always been spontaneous, he’s a long term planner. One thing I remember in particular, which taught me skills I still use as a grown-up, was budgeting for vacation trips. From the age of 10, he got me to “apply” for vacation pocket money, asking me to list items I would typically buy on vacation (ice cream etc), and estimate how many I would buy during the trip. He showed me a good format, and how to sum up in a column, and asked me to write a cover letter “applying” for the money. (He always granted me the sum I had in my budget, after careful revision, and after adding an extra sum for “misc.” :). I loved doing it, and I really learned a lot by doing it. (Note: He did not ask me to do “vacation accounting”, only the budgeting. Accounting would have ruined the fun for me :-) A wise father, I think :-)

  • Fazillah

    My mum started us four siblings to have a saving accounts at the young age of five.Our daily pocket money of a dollar each will be accounted for at the end of the month and will be kept in our accounts.The highest amount saved will be given a token of a small gift such as an eraser,pencil to give encouragement for further investment.
    The encouragement given has instill in me to save money that can be used in time if need.
    Thanks mum for the great way you taught that is still being prcticed until now by us.

  • Saofranklin

    This is a fabulous idea. Thank you for sharing.

  • Abby Zhang

    Teaching our kids to save sounds so obvious, yet if we looked in the mirror so many of us are guilty of not being able to save ourselves. One of the best ways to teach your kids is simply to set a good example. Parents who perpetually live in debt raise the risk of having kids who are comfortable with that lifestyle. I try to be open with my kids about how my finances generally work (if not particulars). I actually just recently sat down with them and went through the IRA at Fidelity and how investments make money over time, the LifeAnt insurance policy ($10/month) and how it grows and protects them, and the Chase bank accounts, and the difference between a checking and savings account. I believe in teaching your kids saving practices, but I also believe that having financial literate kids who have a good example from their parents will go a long way to bringing our country out of its debt problems.

  • http://canadaloansearch.com/ CanadaLoanSearch

    Nice article! I know we live in the digital world now, but sometimes it’s a good idea to walk away from the computer, tablet, or smartphone once in a while and sit down with your kids. While I know there are quite a few online financial education games, are there any games, specifically board games, you are aware of that teaches financial education for pre-k kids? By the way, it doesn’t hurt if the game is fun!

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