Teach Your Child to Save Money

Edited by Train Wreck, VisiHow, Eng

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Teaching a child how to save money is something that far too many parents get wrong. It's not that parents don't want to teach a child how to save. Instead it is due to the average parent having received very little financial education. This is not to say that parents as a rule are financially illiterate. Rather it's to say that most of us do not receive a proper financial education at any point in our lives. Instead we are thrown to the wolves with little more than a rudimentary understanding of piggy banks, coins, and if we're lucky a college savings account.

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In this tutorial we will teach you how to create a solid financial foundation for your child or children. This will not be easy for you, however you will reap the benefits both in terms of raising a financially healthy adult, and hopefully never having to bail out your children from credit card debts or any of the other financial pitfalls of adult life.

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Teach your Children to Use Money as a Tool

For most parents teaching a child to save money starts with a bank account that generally gets a few dollars here and there. There may also be an allowance of some sort tied to this. However in most cases the allowance is pitiful, and there's no real responsibility tied to it.

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The fact is that life is hard. If a parent fails to bring home enough money to feed their child or children, then everyone goes hungry. Likewise if bills are not paid, then the lights go out. Most children grow up in an artificial cocoon of safety provided by their parents. This doesn't drastically change until they grow up and move out. Even then children are aware that anytime they need help mom and dad will probably be able to provide it.

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In order to teach your children to use money properly, you need to first teach them fiscal responsibility. This means tying much more than just cleaning up a room to the few dollars they may be earning as an allowance. It means things such as being able to shop for clothes, food, and even paying for entertainment. Below we will list some examples of how you can tie an allowance to teaching your child to use money.

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  1. 1
    Start giving your child an allowance as soon as he or she is able to help around the house.
    This means even if he or she is not fully able to do a task such as sweeping the floor, he or she can still learn to try and improve in time. While there are several ways to do this, the easiest is probably simply paying something like one dollar per week per year of age for the child. For other countries where the salary and prices differ, you can take 1/2000th of your monthly salary per week per year of age for the child.
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  2. 2
    Teach your child how to spend his or her money.
    This is most easily accomplished by setting up three jars. Label each jar. One should be labeled spending, another should be labeled savings, and the other should be labeled personal.
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    • Spending is obvious as it's money that will be spent on things such as clothes, food, or other actual needs.
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    • Savings is also obvious, as it's money that should be either saved, or invested. We have more on teaching your children how to invest in another article.
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    • The last of course is personal, which means the child could spend it on anything that he or she chose. This might be a videogame, a shirt that might be outside the bounds of something you would normally purchase, or a phone accessory or anything else they might want. The point being that at this stage the money is theirs. They should be allowed to do whatever they want with it within the realm of reason.
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Give Your Child Real World Examples

In order to teach your child how to spend money, they'll need real world examples. This is why it's not going to be easy for you as a parent.

  1. 1
    You'll need to visit a grocery store without your child.
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  2. 2
    Create a list of 4 to 5 food items that you would normally use.
    In an average family, this might include pasta, canned fish, juice, chips, and cereal.
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  3. 3
    In order to make sure you're giving your child a fair example, it's important that you know the price of the items you normally purchase.
    Some families will purchase the lowest priced items, while others might purchase the highest priced items. Other families will focus on what is healthy. Therefore, whatever your particular budget ends up being, note it, and then add a few dollars extra.
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  4. 4
    Take your child to the grocery store.
    Give him or her the list and the money. Let him or her know that this is your approximate budget for these items and that anything left over will be equally divided between their three money jars, which we discussed earlier in this article.
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  5. 5
    In the event your child saves quite a bit more than you do, it's important to reinforce his or her spending as a good lesson.
    If he or she bought things that you might not have normally purchased, ask him or her why and discuss it. Honestly take into account any dietary or health considerations that may be applicable to the foods, and teach these to your child as well.
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  6. 6
    In the event your child spends to the maximum of the budget or even goes over it, you'll need to take a little extra time teaching him or her how to budget the money that he or she has and shop within his or her limits.
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  7. 7
    This type of shopping can and should continue to the point that you are eventually able to share your entire grocery list with your child.
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This is just one of many ways you can teach your child to budget and save money. Another way is with clothes shopping. Some families also create vacation, or amusement budgets. For example setting a particular budget for a trip to the movies, or a day in the park. Whatever you choose to do consider how you would spend the money if you were a child, and then consider how and why you would spend it as an adult. The end goal of the financial education you are providing for your child is to teach them to make financial decisions at least as good as you do, if not better.

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Additional Tips

  • Part of your financial education for the children involves teaching them went to work, and when not to work. If you only tie money to physical chores, you run the risk of teaching your child to be lazy. At a certain point time they may simply decline the pittance that they are otherwise paid for chores, and elect to do nothing.
  • Many children grow up in homes with one working parent and one stay-at-home parent. In the eyes of the child, everyone has responsibilities. In healthy families the children don't view the parent who leaves the house to work as the one who owns the money. They see money is shared between the working parent and the stay-at-home parent, who also works keeping house or raising children. This leads them to correctly expect some form of money as well, which is why a part of funds should be shared with the children. This is also why it's important to tie responsibility to the funds. While you certainly could shop for your child's clothes, it teaches them a much more valuable lesson when you allow them to shop for the clothes.
  • Understand that your children will probably fail the first few times they try this. This is to be expected. Your children were not born knowing how to write, how to walk, or how to talk. Learning financial skills and money management techniques is no different. Do not expect them to know how to do it. Do not expect that they have your years of experience.
  • Prepare yourself for your children to fail, but reward the things that they do properly in order to teach them important lessons. Build on those positive lessons, and teach your child how to manage their money. The lessons you teach them will be far more important than many of the university lessons you will later pay for.

See more tutorials on money: Manage Money, Save Money, and Earn Using Your Mobile Devices.


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Categories : Parenting

Recent edits by: VisiHow, Train Wreck

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