Saving money is the first step to building wealth and securing financial future. It is never too early or too late to start teaching your kids about managing money. Most people learn the importance of saving through personal experience after making mistakes. You need to understand that if you don’t get a head start on financial hygiene with your kids, they may end up making the same mistakes. That is not a risk you would want to take.
1. Differentiate Needs from Wants
The first step is to help your kid understand that wants are different from needs. You can be the example in this step by showing your own budget. You can tell them that food, clothing, shelter, and other basics are the real “needs” of life. Wants are everything else on top. This lesson is especially important for teenagers who believe they need everything just because it is the latest trend and their friends have it.
2. Track Spending Using an Allowance App
An important part of being a saver means keeping tabs on your expenses. Get your kid to start using an allowance app that can help them keep track of their allowance, savings, and expenses. They can determine their weekly expenses this way and identify where their money goes, which can be an eye-opening experience. Sit with them through the analysis and help them find better ways to manage their money.
3. Encourage Them to Start Earning
68% parents in the US pay their children an allowance for completing their chores. Most kids in middle school end up earning $26.58 per week on average for six hours of chores. Encourage your kids to earn if you want them to become thrifty savers. Earning allows kids the opportunity to learn to use it where they want. You also help them understand the value of hard work and hard-earned money.
4. Set Clear Savings Goals
Kids don’t function like adults. They don’t plan or look beyond the next week. Asking them to save without giving them a reason to would likely seem pointless to their brains. However, when you help them set clear goals, you give them a purpose. Make sure you let your child pick the savings goal, even if it is to purchase a video game. Also, help them break down the goal into bite-sized savings. For instance, if they need to save $50 and their weekly allowance is just $10 – work with them to calculate minimum savings per week.
5. Provide a Savings Stash
A dollar may not seem like much to you, but it is the world to your kid. You want them to feel responsible with their money. You should give them a safe space of their own to save their cash. This is especially true if there are other siblings in the house. For teenagers, you could consider opening a checking account geared specifically towards their unique needs. This could be a great way to make your young adults financially responsible and give them something to brag to their friends about.