One of the most important lessons we can teach our kids is to save money. Teaching them to save incorporates many life lessons: waiting for what they want, preparing for the future, self-control, and many more. So what is the best way to teach your kids to save?
For younger kids, short-term results are very important. They need to understand the correlation between saving and spending. Hopefully as they get older, they are able to wait longer and longer to receive the payoff for their hard work. One major issue in the lives of teenagers (and adults) in America is delayed gratification. That’s why our nation’s credit card debt is out of control, why there are many people who can’t make payments on their light bill but still have an iPhone.
According to this credit card debt statistics website:
Americans are juggling about $796 billion in credit card debt alone, according to the statistics.*
Average credit card debt per household with credit card debt: is $5100 and expected to rise to $6500 by the end of 2011;
Teaching kids self-control is a difficult task, but one that is essential for their success as adults.
There are two different types of saving lessons our kids need to learn: Saving for something and saving just to save. Both are valuable lessons. Younger guys have a more difficult time understanding the second one, so, obviously, those lessons need to be age-appropriate.
Saving for Something
This one has become automatic for our kids. On “pay-day,” we break up their money into smaller bills or coins. They are required to divide their money into give, save, and spend* envelopes. They always have something they want to save for, so we’ve tried a variety of techniques to help them keep track of how much money they are saving and how close they are to achieving their goal. (Most of these are very visual – posters, thermometers, all kinds of charts.) Celebrating their achievement of that goal makes it even more meaningful when they can finally enjoy all of their hard work.
*As time has gone on, I have begun to require that the kids to put money into their “spend” envelope – even if they want to put it all in save. That sounds counterintuitive, but I started noticing that their savings plans didn’t have as much “staying power” when they funnelled all of their money into Save. It wasn’t long before they wanted something small (candy at the store, a coke at the baseball field’s concession stand), and they would be frustrated when they couldn’t get it – because I certainly wasn’t paying for it. Then they would quickly talk themselves OUT of what they were saving for in order to justify having money to spend right then, only to regret it later. By training them to leave themselves some “blow money,” it helps them to sustain their intensity for saving.
So, every time the kids get money, here are our steps:
Divide it up
Choose where/when to donate the “give” money
Update savings goals
Go Spend Money! (Sometimes)
I love watching my kids on payday. They are filled with enthusiasm and anticipation over what they are going to do with their money. Watching my kids brainstorm what they could do is so much fun.
As our kids have gotten older, we’ve also seen that they need an additional lesson: Kids need to learn to save for the future, not just for a specific item. I think that’s worth a post on its own, so I’ll save that for later.