According to a 2016 GOBankingRates survey, 35 percent of all American adults have no money at all in savings. This dangerous situation illustrates the importance of teaching your kids how to save money. Kids who save usually grow up to be adults who save. While you may give your children an allowance, are they saving anything from it? Most children don’t have a kids’ savings account. According to the American Institute of CPAs, only one percent of children save any portion of their allowance.
Even if your children only receive a small allowance, the objective is to teach them effective saving habits. While they may not earn enough money to retire young, they will learn the habits that could help them reach that goal as adults.
Here are four of our favorite tried-and-true ways to encourage kids’ savings.
Use the Jars Method
Children can visualize how their money is accruing if you have them label different jars with what they are saving for. For example, you could have your child save for a short-term and a long-term purchase, such as a doll and a bike. On the jars, have your child draw what he or she is aiming to purchase. In addition, keep another jar for regular expenses, like after-school snacks or movie tickets. Next, work with your child to determine how much of his or her allowance to use for short-term and long-term goals.
Let Kids Learn by Shopping Around
Sure, your child wants a television set for their room, but have they found the most affordable version? While detailing their goals, kids should shop around to find differently priced versions of what they want. You can use the opportunity to talk about how to make your money go further and the importance of a budget.
Teach Kids to Save First
One of the reasons that most adults don’t have enough savings is that they don’t save first, before buying anything. Make sure your child learns to save his money for the long-term savings goals he really wants before using the money for other purchases. That way he’ll learn that he is only able to spend whatever’s left over on nonessential items.
Open a Savings Account for Your Child
Children are excited to put their money in a financial institution. It makes them feel as though they are being treated like adults, but opening a savings account for your child is also a smart financial decision. Many kids are persuaded to save when watching their money increase in interest and value.