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Teaching Your Child to Save – Teach a Habit

When it comes to financial literacy and teaching our children how to save, it is a task we should exercise frequently. We’re actually teaching a habit that can help them throughout their lives. And as we teach and help them practice these skills, even in the smallest of ways, we can learn or reinforce our own skills.  Once you’ve identified a couple of ideas for your child, try to focus on these topics at least weekly and incorporate them into daily life whenever you can. Creating fun and short practice and discussion sessions is more effective than lectures. You might sit down and outline your ideas, so they are fresh in your mind. You know what they say, "if we fail to plan, we plan to fail.” And none of us want to fail our youth. If you’re not a parent, it doesn’t mean you can’t share your money wisdom with a niece, nephew, grandchild, or neighbor.

Teaching and encouraging good savings habits doesn’t have to be a sit-down class-like activity. You can talk about these skills at the dinner table, while you’re driving the kids to practice, dance class, the swimming pool, sitting around a campfire, or on a walk. Here are some ideas to get your child on the road to successful savings.

Discuss how they would spend their money. Make the questions direct. “If you had XX dollars, what would you spend it on? Why? Would you ever spend your money on something bigger, for others, etc.?”

Three simple reasons to save and give age-appropriate examples:

  1. Short-term/small purchase goals – small toys, candy, lunch, gasoline, soft drink or coffee, movie tickets, etc.
  2. Long-term goals – buying or caring for a pet, bicycle, car, rent, insurance, or college.
  3. For Sharing – buying a card for a sick friend or relative, giving at church, giving to charitable groups that help others (offer some groups they might be interested in).

Explore the concept of money coming in before going out. Brainstorm with them on safely making or earning money. Perhaps they earn an allowance for chores, receive birthday money from family, or even help neighbors for cash. i.e., mowing lawns, walking dogs, pushing the trash out, etc. As they get older, discuss the importance of getting and keeping a job.

Support your child in their savings. If you can, match their savings (i.e., you give 50 cents for every dollar they save), or when they are older, maybe offer to pay for their car insurance if they save to buy the car and pay for gasoline. Even college can be a shared expense, overwhelming for all, but especially for students if they think they must earn all their schooling expenses. Work with them on finding grant/scholarship opportunities. Tell them if they save and/or receive X amount in scholarships, you will buy their books or make up the tuition difference. Paying for college is a discussion that can happen as early as middle school. It’s also an excellent way to encourage good grades so they can get those scholarships.

Ideas

Make sure your examples are age-appropriate. One of my favorite parent lessons came from one of our John Michener Scholarship applicants. They described how their parent first taught the concepts of obtaining and saving money. The youngster was told that they could have every new shiny penny their mother received went she went shopping. They needed to pay attention to the transactions (which meant behaving in the stores) and remind their mom that the pennies belonged to them. That was their "work." The reward was the coins. The youngster started learning what they could buy with pennies and what they could not. More profound concepts were then taught. Now, the student has recently applied for a scholarship to augment their savings for college expenses.

Knowledge of basic finance is a strong foundation that can take us a long way in life. When we get older, we learn about using credit wisely, as some purchases like a car or home are tough to buy with cash. But reigning in our spending to match our savings is a good start.

  • Any age – Open a savings account for your child, infant, or college student. Take them with you to the credit union, even if they are just observing. Staff will make them comfortable and feel that they are part of the process. Besides, there are NO fees for CUA youth savings account, and you can teach them about earning interest! Let them make the deposits, as it will increase their confidence in saving. Check out CUA’s Balance Boost account that pays the highest rate on the lowest balances. It’s a good way to show your child the power of interest.
     
  • 1-5 years old – Focus on just filling up the piggy bank. When it’s full, you can ask if they want to keep saving, spend, or give to others. If they're going to spend, then provide examples of what they can afford with the entire bank and ask them to set a goal. Get a fun, colorful bank and let them add to it. They don’t have to know how easy it is to get into it! You can also use their deposits as a counting exercise, even if you’re doing most of the counting.  
     
  • Elementary age – Teach the three types of spending and needs vs. wants.
    • Short-term and smaller purchases.
    • Long-term and more expensive spending.
    • Sharing/Giving to others
       
  • Teens – Reinforce the earlier lessons with age-specific goals, dreams, even wants. Encourage the practice of saving by example. Share what you are saving for and celebrate with them when one of you reaches your savings goal. Challenge them to save more than you in a short time. Make it fair with a percentage of your income or a common goal where you both save money that you usually spend on a soft drink or coffee. If your teen is working, teach them about paying themselves (their savings account) before spending or paying other obligations. It doesn't have to be much; $ 5-10 each paycheck is a good start.
     
  • Teens & College Age – Share some of CUA’s FREE online resources. Free tools for you and your young person. Or, if they’re ready, introduce them to mobile banking so they can watch their account for growth and start learning more money management skills.
    • It’s a Money Thing – found under CUA’s Resources/Educators link. Short videos to capture your teen’s attention. Plus, there are lesson plans and handouts that both teachers and parents can use! You might even watch the videos before bringing a subject up. They are just 2-3 minutes, each.

      Found under Resources/Money Management
       
    • BudgetSmart – Tools for budgeting, tracking expenses, and managing your money.
    • GreenPath – Podcasts, calculators, webinars, housing classes, and free financial counseling.
    • CheckRight – Basics on checking accounts, credit cards, mobile banking, etc.
    • Financial Uncertainty – From student loan counseling and credit report reviews to managing through layoffs and extensive debt, this page provides a reminder to look to your Credit Union of America for guidance and help. You’ll find contact information for getting the help you need.
       
  • Pre/College Students – Work with them to find ways to save, apply for grants and scholarships, or reduce their daily expenses.

At all ages, remember to set goals, review progress, brainstorm ideas for improvement, and allow monitored spending. If we never feel the joy of spending/giving, none of us stay motivated to save. Fun learning leads to good saving skills, which allows for rewarding spending!

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