Kids pick up on everything, the good, the bad, and the ugly. That’s why it’s important to teach them good life skills early and then let them see you put those skills into action. Saving money is one of the best lessons you can pass down to your children. Not only will it lead to a larger bank account, but it will teach them responsibility, goal setting, and preparedness.
It’s Never Too Early to Discuss Saving Money
No matter the age, it’s likely your child’s first experience with money is spending it. They are either spending money they received as a gift or see you paying for things. You may not realize it, but that early experience is teaching them that money is for spending.
What they likely don’t see is you having a certain percentage taken out of your paycheck for a savings account or maybe even a company sponsored retirement plan. But that part is just as important than the spending. Starting at a young age, talk to them about saving money regularly. You can start by talking about a piggy bank and opening a bank account. Instilling the idea of saving money early, will make it more likely they will save as an adult.
Teach Kids How to Grow Their Money
One of the best things about teaching kids to save is showing them how their money can grow. This notion of getting more money for not doing much, will excite them and make them curious. Be sure to explain how and why not spending money right away can help grow their wealth.
Most savings and money market accounts earn interest every day. Even though it’s typically a small amount, make sure to highlight this to your children. Simple savings accounts will grow, albeit slowly, they will grow over time and it’s worth having money in them.
You can also start investing lessons very early by opening a custodial account. A custodial account is simply an investment account that’s in a child’s name but managed by an adult. These accounts will have a higher risk/reward and will introduce your child to investments before they leave the house.
Building to Your Future
Saving money is a great habit to have. It’s one you want your kids to develop too. Parents should consider their child’s age when it talks to saving money. If you have a young child, you might consider giving them short-term goals, like buying a toy. As they get older those goals should lengthen, like homebuying and retirement planning. By encouraging your children to save early, you’ll teach them a lesson they’ll take with them through adulthood.