How to Teach Your Kids to Save Money?

teaching kids how to save money

Teaching children to save money can be a real challenge. Saving is equivalent of thinking long-term, and for a kid who, by definition, lives in the present moment, it can be a complicated concept to grasp.

While all children are different, and perceive matters in a unique way, they are some ways you can teach them financial literacy. Depending on their age and personality, you will be able to implement a few techniques at different time periods.

In this article, we’ll explore various ways to teach children how to save money. We’ll add an age notice in the beginning of the paragraph. You can choose whether or not you want to take it into account, depending on your kid’s maturity.

1. Saving for a goal

Age range: 5-10 years old

This is probably the most basic way to teach a child how to save money. Children of this age work well with an emotional incentive.

The first time your child asks for an expensive item, hop in with a sum of cash to hand in to them. Then, you’ll be able to explain to them that the item is too expensive to be bought for no reason, so they’ll have to save money to complete the purchase by their own means.

Determine when and for what reason you will then provide them with a set amount of cash. And watch them save day by day until they are able to purchase what they desire.

2. Buying necessary items

Age range: 11-15 years old

Saving money isn’t all about buying things we want, but also about buying things we need. To teach your child the importance of using money for other things than leisurely activities or items, you’ll have to implement another rule.

Now that they know how to save money towards a goal, you can provide them with a larger weekly remittance. With it, they’ll not only be able to buy items they love, but also clothes, snacks, and activities with friends. 

Make sure to not limit them too much in terms of allowance, as the process can quickly become frustrating if their lifestyle drops too much.

3. Assimilating credit knowledge

Age range: 16-18 years old

As your child is maturing, they’ll soon be able to take on loans to pay for their expenses. At this stage, it is important that they know about credit and debit cards, their pros and cons, and the expenses related to their use.

Credit cards are a double-edge sword and can put some adults in financial distress. The real issue is that the less one knows how to manage their credit score, the poorer it gets. And the poorer it is, the more difficult it is to save or invest money.

Make sure your teenager is aware of the main expenses that come along with credit cards, like transactions or withdrawals fees, and be sure to teach them about the cost of loaning money (ie. interest rates).

4. Performing investments

Age range: 18-25 years old

Know that your child is a full-fledged adult, they have probably assimilated most of money management techniques you’ve been teaching them throughout the years. Time has come for the real deal: investments.

The ultimate reason why we are all working is to build wealth for ourselves and our families. Your child is no different and will be looking to build wealth for themselves. Investments are the perfect mechanism for that.

You’ll have to teach your child about the different types of investments (real estate, stock market…) but also about the power of compounding interest, which can become a strong asset over time.

Other tips to include at different time periods

We did not add an age range to the following tips, as they will greatly depend on the child’s maturity and knowledge. However, we do recommend you start giving them sense as soon as possible. Remember: any habit they already have in place, is something they won’t have to work on later on in life.

Matching the saved amount to encourage your child to save more

This technique works well at a young age, but can become more difficult over time. Say, your child saves $50 over the month. At the end of the month, to congratulate them, you can match the saved amount. Now, instead of having $50, they have $100. 

This will encourage your child to save more money. However, the greater the amount, the greater the compensation, so be sure your own finances can follow…

Giving bonuses for additional chores or good grades

This one is a classic. When your child performs additional chores or has good grades, you can reward them with a bonus, which can vary depending on what is a priority for you, and your child’s weakness. 

For instance, you may not want to give a 10% to both children for good grades if one is always top of their class while the other struggles more with schoolwork. In that case, it may be useful to adapt bonuses. Say, 5% for the child in the top-tier, and 15% for the one who has to put in more effort.

Explaining the concept of interests for both savings and credits

This connects us back to our third tip. Teaching your child the concept of interest is essential if you want them to become financially literate. It matters for both situations: when they save money (ie. interest they earn by loaning money to a bank) or when they borrow money (ie. when they take on credit to cover expenses or make an investment).

Another aspect of that is to explain taxes. Of course, you can’t possibly know how all taxes work. However, you can explain to them that they will probably have some taxes due on every revenue they have. Acknowledging this concept as ‘normal’ will prevent them from building frustration and fraud temptation. 

Establishing a budget for expenses

This one can be interesting to implement in tip 2. When teaching your children they also have to provide for necessary item, you can start teaching them about budgets and savings goals. 

Please read our blog on the basics of personal finances management to gather more insights.

Self-awareness of their relationship to money

This last part is probably the most important one. Self-awareness is basically what any adult conquers over time. Knowing from a young age what one’s relationship to money is will enable them to strengthen their strengths and palliate their weaknesses.

We all have good and bad ways with money. It’s not a problem. However, the more we know about ourselves, the better we become at building wealth for ourselves and our family.

About Finnt

Finnt is a savings app designed to help families build wealth together over time. Our app is specifically made for family matters and helps you save for your children, and teach them the basics of financial literacy. We believe financially literate people make the best decisions for themselves and family members, as they are able to avoid and minimize money-related problems. On top of what, they can build financial freedom and independence for themselves and loved ones.


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