Tips and Tricks to Teach Kids How to Save Money

1. Money doesn’t grow on trees.

Most kids don’t have a clue where money comes from and what its value is, let alone how to manage it. Ignorance often breeds entitlement. If your children’s only experience with money is watching you withdraw it from the ATM, they may think money magically comes out of a machine at no cost to you. Children need to see, hear and learn firsthand the value of money. Begin by helping them discern the difference between needs and wants. Desiring something isn’t inherently bad, but putting wants ahead of needs is when a case of the gimmes gets out of hand.

2. Let’s talk about it.

If discussing money matters with your children has you flustered, you’re not alone. According to a recent Forbes study, more than 74 percent of parents are hesitant to talk about money with their kids. It’s been said that parents are more inclined to talk about the birds and the bees than they are about finances. Money doesn’t have to be taboo. Seemingly innocent questions like “Are we rich?” are catalysts to conversation about your family values, hard work and long-term savings. Ask your kids good questions about money and, in turn, encourage them to think of good questions to ask you to keep financial conversations positive. Let them know that you are open to discussing money at any time. Research indicates that the impact of one hour of financial instruction wears off five months later. Realize a once-and-done talk will not give the traction that an ongoing conversation will provide.

3. Lead by example.

According to financial guru Dave Ramsey, more than 90 percent of Americans buy things they can’t afford, while a whopping 76 percent live paycheck to paycheck. Is it any wonder so many parents avoid discussing money matters with their children? Little eyes are watching. Make sure your financial habits align with the values you desire to impart to the next generation.

4. Make a game out of it.

Who said learning how to make good financial choices has to be boring? Board games such as Monopoly and LIFE are excellent tools to teach wise spending and investing. Looking to teach savings through play? Check out Mass Mutual Financial Group’s free downloadable online game, Save! It helps kids discover the value of delayed gratification in a 3D fantasy world where players can earn virtual money while trying to avoid the lure of “iWannas”—impulse buys known better to kids by their real names: toys, candy and soda.

5. Allowance vs. commission.

The best way for kids to learn how to save money is to have their own. But if they’re simply given money each week in the form of an allowance, it deprives them of the opportunity to connect work with pay. Let your child earn a commission instead. By doing chores around the house—feeding the dog, taking out the trash or mowing the lawn—they quickly will realize that money can be earned and isn’t to be expected for simply existing.

6. Visualize savings.

The concept of saving initially can be very abstract for children. Encourage your children to set financial goals: Build a wish list, evaluate what’s really worth working toward and set a plan of attack. When kids start bringing in the dough, give them a fun place to put it. Long gone are the days when a piggy bank looks merely like a pink porker with a slot. Piggy banks now come in a variety of sizes and styles, from character banks to ones with slots designated for spending, saving and giving. Better yet, use clear jars, such as Mason jars, so your child can see his money add up over time. Celebrate with him as the cash fills the jar!

7. Match contributions.

Many employees opt to use their company’s retirement plan when it promises to match contributions made. Your children may be decades away from cashing in on their 401k accounts, but it’s never too early to introduce them to the concept. Consider offering to match a percentage of what is saved, dollar for dollar. This comes in especially handy when kids are working toward an expensive, long-term financial goal, such as a computer, phone or car. Just make sure to state clearly how much you’re willing to contribute. A super-savvy saver can make a parent hustle to catch up.

8. Set up a savings account.

Opening up a savings account is a natural next step to help a child receive the benefit of interest. Nothing is more rewarding than knowing money will grow as long as it’s not touched! Most banks offer free savings accounts to minors (and some offer breaks on fees to parents if the child’s account is set up at the same bank). Just make sure to check the fine print, as some institutions require a minimum account balance or monthly automatic deposits to avoid penalties.

9. Turn off the tube.

Kids represent the most important demographic to the advertising industry because they not only hold their own purchasing power, but also have tremendous sway over their parents’ spending habits. Advertisements directed toward children have more than doubled over the past two decades. The average child between 2 and 11 years of age views more than 25,000 ads a year. Looking for a simple solution? Less screen time equals fewer marketing ploys.

10. Let them fail.

Letting kids handle their own money means they’ll learn through some trial and error. Stepping in when you see them making a costly mistake is tempting, but instead of bailing them out, let the mistake become a teachable moment. Kids will learn early on not to make the same mistakes twice.

Lauren Greenlee is a writer and a mom of three hailing from Olathe.