With your kids out of school for the summer, consider teaching them a subject not taught enough in classrooms: personal finance. According to a 2014 study by the Council for Economic Education, all 50 states require some economics material to be covered in kindergarten through 12th grade education, but only 19 states mandate a personal-finance course. To help your child develop healthy money habits, here are some pointers.
Why is saving good?
As the volume of advertising increases on television and online, fostering the foundational skill of saving money will promote delayed gratification and provide a buffer to the consumer culture that repeatedly urges impulse spending. At the basic level, learning to save helps teach your child about these concepts:
- Setting financial goals: Kids who must wait to buy a toy or game will realize that they must acquire the money first. It should also help them distinguish between a “need” and a “want” and learn not to ask for something every time you take them into a store.
- Power of choice: As kids grow, they discover that their spending money is limited and so they must make choices. Buying the LEGO set means no scooter, doll or basketball. Eventually, this can extend to choosing lower-cost generics over well-known branded products to save money.
- Earning rewards: As children become teenagers, stashing money away in the bank helps them learn about earning interest and how their money can grow. Eventually, when credit cards enter into the picture, smart card use can also help them save.
How can they practice saving?
As financial issues arise in everyday life, it’s important to encourage regular activities that can get kids in the habit of saving their pennies. Here are a few ways that can be accomplished:
- Three jars: Have your kids separate their money into three jars labeled “Spending,” “Saving” and “Sharing.” Help them decide how much they want to have in each. You can encourage them to put more into the “saving” or “sharing,” but ultimately it’s their choice.
- Discount hunting: When you visit the grocery store, show your kids how to use discounts and coupons to save money. For follow-up trips, have them find discounts online or coupons in brochures and use them – even make a game out of who can find the best ones. This activity can help instill a sense of active saving where the results are more immediate and tangible than saving in jars.
- Using a savings account: By the age of 8, as the Money As You Grow worksheet illustrates, a child tends to be ready to open her first savings account. Regularly depositing money into it will help develop a habit of saving for future expenses. These accounts also show the child how she benefits as interest gradually accrues.
What are the rewards of saving?
Once kids get in the habit of saving, they’ll be ready to discover how to navigate checking accounts to maximize their gains and reduce their costs. For instance, some require higher minimum balances in return for higher interest rates, while others such as Westbury Bank’s IDEAL Rewards Checking Accounts only require a few simple actions to earn higher interest on deposits. If your kids start saving early, it may be easier for them as teens to keep cash in the bank and add to it each week instead of considering whatever money they receive to be what they can spend that weekend.
The basic practice of saving starts with learning financial self-control despite the constant chorus of advertising urging them to buy the latest and greatest clothes, gadgets and whatever else one can get. Once a child learns to save, they’ll be on the road to reaping rewards later in life.
This article was written by Cherise Fantus, from NerdWallet.