Teaching Good Money Habits to Kids
Managing money is one of the most significant life lessons parents can teach their children. Instilling the value of budgeting, saving, and spending wisely sets your child up for future success in handling their finances.
Let’s look at some ways to introduce good money habits to children.
Opening a child’s first bank account can be an exciting and gratifying experience. Most importantly, it establishes the opportunity to begin teaching money management and introduces them to the banking fundamentals of depositing and withdrawing funds.
The first and most essential lesson is that deposits must take place before spending and withdrawals cannot exceed available funds in the account. Secondly, getting your child accustomed to making consistent deposits to the account demonstrates the benefit of saving as they watch their balance grow each month.
Short Term Savings Project
A practical way to teach the value of saving before spending is to have your child identify a prized item they want to buy. Keep it somewhat reasonable but make sure it’s a true “wish list” item. From day one, have your child set a weekly savings goal to reach the target ticket price. Offer extra chores or other opportunities to earn money as it illustrates that earnings take time and occasionally extra effort. Once they have reached the goal amount, set a time to go make the purchase as the reward.
Teaching the idea of having money in hand before spending is extremely valuable. As a side benefit, your child may decide they want to save for a different item altogether, or simply keep the savings growing.
Money Management with Three Jars
Beginning to learn about money management can be as simple as the ‘three jar’ technique. Setup three jars or separate containers for each child. Label them “Savings,” “Giving” and “Spending.” As they earn weekly allowances, payments for chores, or income from a part time job, have them place a set amount in each jar.
Each month, provide them “interest” for the “Savings” jar amount, even if just a small percent. For the “Spending” jar, let them know those funds are theirs to use at their discretion. If they end up with an empty spend jar when they want to buy something, they’ll have to wait to earn those funds before making the purchase. On the “Giving” jar, have them designate how they want to use those funds whether a charity, church, or local cause. Providing the opportunity for kids to choose a cause and make a meaningful contribution makes them feel good about their generosity and puts spending in perspective.
These examples teach financial literacy as well as patience, prudence, and discipline in saving and spending money. Eventually, your child will become accustomed to these fiscal habits which will reap benefits in their adult years.
Stop in one of our branches to open a Junior Savings account for your child!
published on 08/30/2021