Four simple ways to teach kids to save money
Help them prepare for their financial future now
Every April, the ABA Education Foundation sponsors ‘Teach Children to Save Day’ to highlight the importance of teaching young people about financial management. Financial experts say that we set children up for success when we teach them financial literacy skills.
A year-long study showed members of Junior Achievement Canada’s financial literacy program were three times more likely to save more, borrow less and spend less than they earned.
Financial literacy is a learned skill, but it doesn’t have to be complicated to be effective for children. Here are four simple financial literacy techniques to help your kids prepare for their financial future:
1) Show them that a budget can be simple .
Many people grow up feeling intimidated about budgeting, so they never learn. You can make budgeting straightforward for children by using the four-jar budgeting technique.
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One for short-term savings goals (30 percent of income)
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One for long-term savings goals (30 percent of income)
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One for spending (30 percent of income)
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One for donating (10 percent of income)
If you give your child allowance or chore money, be sure to provide it in small denominations, so it’s easy for them to divide between their jars.
2) Illustrate their savings goals.
Break out the art supplies with your child to create an image of their savings goal. Having a visual reminder of their savings goal will help your child stay focussed on the prize.
3) Help them learn the differences between needs and wants.
Use examples they can relate to; look around the house and discuss your family's choices and the things that you could live without. This process will help them to make more informed spending decisions in the future.
4) Set up a children’s savings account at a financial institution.
While the four-jar budgeting method is effective, it should work in conjunction with an actual savings account. Set a threshold for the amount in the long-term savings jar ($20, for example), and when your child reaches that threshold, make a big deal about depositing his/her savings in an account where that money will earn interest.
