Money burning a hole in your kids’ pockets? Do your kids seem to think money grows on trees? Then it may be time to begin teaching your kids how to save money.
The good news is, establishing good saving habits in your kids may not be as difficult as you think. Here are six ways to help get them on the road to financial freedom:
1. Match their savings dollar for dollar, or quarter for dollar, or whatever fits your budget. What kid doesn’t like free money? Okay, so it may not be free to you, but the saving habit you are establishing now will save you a lot of money later on.
2. Give them interest on their savings. You can customize the interest rate so that their account can grow at a faster rate. This is another example of “free” money and over time will introduce them to the power of…
3. …compound interest. Einstein calls compound interest the eighth wonder of the world. And for good reason. Over time even small amounts of money can grow into lots of money. A good way to help kids understand this is by having them “see” their money grow visually developing a sense of responsibility . Any chart or spreadsheet program will do the trick, or for something a little more kid-friendly you can use a kids’ savings program like KidsSave.
4. Put them in charge of buying their own stuff. This is usually done through allowance and includes all those extra things that kids usually want: bubble gum, video games, trading cards, cell phones, etc. You may be surprised at how frugal they become when it’s their money that’s being spent. And this one has the added benefit of eliminating the I wannas.
5. Give your kids a concrete reason to save by having them set personal financial goals. Make sure the goals are easily attainable in a relatively short period of time. This will increase the chance that they will want to set up another goal, at which point you can increase the time and amount they need to save. And these goal-setting skills will help them when they’re ready to begin saving for a down payment on a car or house.
6. Help your kids open a savings account at a bank or credit union. Kids love to act “grown-up” and tapping into this interest may be the spark that ignites their life-long saving habit. Not to mention that it’s harder to spend money you don’t have easy access to!
And, of course, kids are notorious for watching what you do when you’re not looking. If you model good saving behaviors, chances are, your kids will probably do the same.