After the conclusion of how to raise a money savvy kid, this week we’re going to begin our new series on teaching kids how to save money. This is a great skill to learn, especially early on in life when it has the potential to become a habit. That’s not to say that older children can’t be taught to save money, just that it’s easier to start at an early age.
Today, we’ll talk about one way that you can start teaching kids how to save money.
How can you teach kids to save money?
Teaching children to save money is important and difficult. From a young age they are exposed to marketing messages telling them to buy more, want stuff, and spend money. There are very few, if any, messages about saving money and the rewards of delayed gratification.
Starting early is important and the earliest saving tool is the good old-fashioned piggy bank.
The Two Piggy Bank Approach to Teaching Saving and Spending
Many parents buy a piggy bank for their child and show them how to put their money in the bank. However, the concept of saving can be lost. Grabbing two banks can make a difference. Here’s how it works…
One piggy is for saving.
One piggy is for spending.
Go ahead and label them or even name them, if you wish. Hang signs over their heads or place label stickers on them. Just be sure that your child can easily differentiate between which one is for saving and which one is for spending. Now when your child gets some money, which could be allowance or birthday or extra chores, they can decide what they do with it.
They can save it or they can put it in their spending bank.
A good rule of thumb is to have them divide it up. For example, they can put 60 percent into saving and spend 40 percent of it, or 70/30.
This teaches children that money has many purposes. It can be used for fun right now and it can be set aside for later. At a very young age this is an important lesson to learn. It helps prevent children from developing a scarcity mindset and supports good saving habits at the same time.
When you go to the store, you can ask your child if they want to take any spending money. They’re then able to make independent decisions about what they do with their money which is again a powerful lesson. Many adults feel controlled by their money instead of the other way around.
Did you have a piggy bank growing up?