The following guest post is from Debbie Dragon. Read more about Debbie after the article.
It has been said in the news over the last few years that Americans are not saving enough money. Many people blame the lack of savings finesse on their inability to make ends meet, let alone put extra cash away, but the reality is that most people never actually learned how to save.
It is for this reason that teaching kids what it means to set and maintain savings goals is more important now than ever.
Getting Started
For some parents, it is the ‘getting started’ part of the equation that is the most difficult to conquer. They may feel their kids are too old or too young to learn the importance of basic personal finance lessons.
The reality is no one is ever too old or too young to learn money lessons. In fact, kids of any age have the ability to learn and effectively incorporate good money habits into their lives.
Establishing Allowances
Even toddlers can have a hand in keeping the household running smoothly. While some are quick to argue the effectiveness of financially rewarding kids for doing household chores, there are certainly lessons to be learned. Every parent can establish their own system for financial compensation based on work done at home.
If your child is old enough to earn cash of their own accord, that income can also be an essential tool for learning about money priorities.
Setting Goals
Once it has been decided among family members how allowances are earned or how much income is generated from a teenager’s job, it is important for parents to have a one-on-one conversation about basic money matters. Even younger children have ideas of what they would like to have or purchase with their money.
For many, it is toys and candy. Older kids may already be interested in saving for long-term goals in addition to the more current desires like a vehicle, new clothing, or entertainment with friends.
Help your child make a list of the things they might like to save for and try not to dictate their personal decisions with your own parental insight. Let them have the majority of control of their ideas so they will be more motivated to start saving.
Discussing Deposit Requirements
Parents can teach kids the basic workings of savings accounts. Depending on age appropriateness, the discussion can be as simple as describing how they get to go to the bank and write their deposits in their savings register. Older kids can benefit from learning about how interest accrues over time.
This is also the time to discuss the amount of money kids should strive to save from a job or from their allowance through regular deposits. For example, 10% of income is the norm for many adults to tuck away into savings from each paycheck based on the ‘pay yourself first’ theory of personal finances.
By teaching this lesson early, parents are essentially setting their children up for successful financial freedom in the future. By teaching kids to always account for 10% going into the bank on a consistent basis, they will likely carry that lesson into adulthood without a second thought.
Let older kids calculate what 10% means in cash terms and help the younger kids develop a list of percentage amounts based on dollar increments. For instance, create a kid-friendly list that shows how much of a deposit is expected based on the dollar amount they receive.
Younger kids can look at the list and easily be able to report back that $4 in allowance means 40 cents must be put into a savings envelope. Since little kids likely earn less in a week than older ones, let them decorate a savings envelop of their own where they can put their change in until they have a sufficient amount for a bank deposit.
Going to the Bank
For kids of all ages, it can be a big event to take a trip to the bank for the purpose of establishing a savings account all their own. It is a big deal to feel the sense of accomplishment in setting goals. While parents have to fill out and sign the majority of paperwork, kids can still enjoy a walk-through of how things work at the bank. They can also be put in charge of collecting their bank register and filling out their first deposit slip.
Older kids may be interested in obtaining a checking account as well, so they have access to some money not going into savings or can start paying some of their own bills as they get older – perhaps their car insurance. All of this can be turned into effective money lessons that will last a lifetime.
Sticking to Your Guns
As a parent, it can be hard to see your child go without something they want. Once you have helped them to establish their rules and savings goals, it is important for you to stick to your guns and not give in when they beg for money to reach their goal.
It is not uncommon for kids to slack off in their household duties therefore failing in their attempts to save for a specific want. If you give in and provide money they didn’t work for, you are essentially reversing the financial lessons you are trying to teach.
When your child heads to the toy store or the new clothing store at the mall and doesn’t have enough cash to cover what they want, they will soon begin to understand the importance of self-reliance and a commitment to budgeting, even if they pretend to think you are the meanest mom or dad on the planet.
There is little chance in their adult life that someone will always come to the rescue financially, so setting kids straight at a young age is one of the best financial lessons a parent can provide.
Debbie Dragon is a freelance writer for ComplexSearch, an online bank rate tracker. Find high interest savings accounts and money market accounts with ComplexSearch.com.”


