Ways to Teach Children about Saving Money

by Shane Barkley

“My son is beginning college in only 3 years!” “My daughter is getting married next spring!” “My son and daughter need a car to drive!”

Those are a few of the many reasons why dads need to save money. As fathers, it’s pretty easy to keep a healthy awareness of our role as providers for our families. Seeing each paycheck arrive in our bank accounts and figuring out how far it will go is an ongoing challenge. And when we look ahead and see those big expenses coming, we don’t need much more motivation that that to save some money when we can.

Counting PenniesBut as I’m sure you know, most children are oblivious to the reasons for saving. But it’s critically important for them. Many of us have seen numbers when financial planners compare people who consistently save even a little money through the years with those who start saving later in life. The difference between the two end balances is staggering, and we all want our kids to reap the benefits of the “consistent savers.” We need to start educating our children now about the benefits of saving — and give them experiences with it.

Here are four suggestions for how to do that:

Model good financial principles.

This is where a lot of good fathering starts, and money is no different. We have to show our children what responsible money management is like. Living within our means and saving a portion of our income is absolutely necessary, and I believe the key is an inner quality that shows itself in our actions: contentment. If we have learned the secret of being content in any and every situation — and we demonstrate that virtue in our spending habits and in other ways — then our children are better prepared to make saving a priority. They will see it in us every day, and it will be a natural thing for them to live out when they have opportunities to do so.

Teach them reasons to save.

In general, people save money for one or more of these three reasons:

  • to have the opportunity to purchase something in the future.
  • to purchase something immediately.
  • and what I believe is the most compelling reason: so we won’t have to borrow money for emergencies or surprise expenses.

Talk about those reasons as daily “teachable moments” arise. During the routine of life, your kids will surely ask some pointed questions about your family budget, and it usually happens when they want something that isn’t in the budget. For example: “Why can’t we go out for frozen yogurt this week?” “Can I get new soccer cleats like other people on the team?” “Is it okay to plan my birthday party at the Fun Palace this year?”

I’d suggest giving them answers that refer to your budget, in pretty general terms: “Sorry, but we can only spend so much each month eating out, and that will push us past our budget.” “Well, the extra money this month is going toward building up our emergency fund.” “Instead of spending a lot of money on big parties, we choose to save that money for things we’ll need in the future, like your college tuition.” I read a news story recently where an 18-year-old girl in Ohio had saved $40,000 for college! Read and talk about stories like that with your kids.

Look for opportunities to have those discussions about how a budget works, why you need an emergency fund, why you want to save for future needs, and many other great money topics. Feel free to share about wise and unwise decisions you have made with money. Tell your kids how, as a teenager, you saved a long time for a specific item, and it sure was rewarding when you were finally able to afford it. When you’re planning to make a significant purchase, let your children in on the process you go through to research the item, including what criteria you used to make your decision, and then save the money to buy it. Too often, kids only see their fathers making the purchase, and they come to believe that dad has enough money to buy anything!

Use terms your kids can understand.

The reasons why you save money may seem obvious to you, but please be patient as you have these discussions with your kids. Children need examples they can relate to. Also, your kids probably have a very limited concept of time. They may not have had to replace anything major, or watch you go through the process of paying for a new engine on your car, a new furnace for your home, or some other big expense. They can’t really grasp the fact that they will probably need thousands of dollars to go to college in eight or ten years. They probably can’t imagine what it means to retire, much less the amount of money needed for it.

Give them opportunities to learn the benefits of saving.

I strongly believe that kids learn about money best by having experiences with it — small amounts at first, and then increasing as they mature. And they learn best when they perceive that it’s their money that is being saved or spent, not yours. They will be more thoughtful about their decisions if it’s their money. They might acquire that money from a variety of places — gifts from Grandma or someone else, earning it through work, or allowances.

With their own money, it also makes your life a bit easier. When you’re at a store and your son starts begging you for something that isn’t among the things that you would normally provide — or it isn’t in your budget — you can simply say, “Did you bring your money?” Or, “Maybe you can save your money for that.” And that ends the conversation. You can take on the role of a financial adviser: “Sure, you can have that. It will only take 2 months for you to save enough allowance money for that.” Or, with older kids, “Maybe you can do some odd jobs for the neighbors to earn the money.”

If your kids are like mine, once they have some money, reality will set in very quickly when they face tough decisions and resist spending temptations. In grocery or convenience stores, the candy is perfectly placed at kids’ eye levels. Your kid(s) will begin to wrestle with the desire for the candy (immediate gratification) with saving for the toy (future satisfaction). It’s good for them to experience that early in life, while the price tags are still pretty low.

Of course, you also want them to learn about the power of saving money and seeing it grow — with interest — over time, and even benefit from their savings at some point. Maybe your child will want to use his savings to buy a car or a computer for school, or he can make a major contribution to his college tuition bill.

The goal is to raise children who are self-disciplined and confident with their money managing skills, and who avoid being dependent upon financial institutions. Your children may not grasp all of the issues you are considering when you save, but they will learn from watching you and seeing the results of your savings. If you cannot explain to your children why you are saving, they will have difficulty grasping the concept for themselves.

Action Points:

  • Begin an allowance so your children can begin to save.
  • Take your child to pick out a toy they want, and help them come up with a plan to save for it.
  • Share with you children about items or projects for which you are saving.
  • Tell your children some stories of how your past savings or lack of savings has impacted your life.
  • Show your high school kids how much college costs and how much the tuition is increasing every year.
  • Encourage your kids to find ways to earn extra money.
  • Have your kids save for a portion or all of their first car.

shane_barkleyShane Barkley is President of Dad the Family Shepherd and author of Dad Cents, from which this article was adapted. He has a degree in business Administration from John Brown University and has 10 years of experience in the financial consulting industry. Shane and wife, Valerie, live in Topeka, KS, with their three daughters. Read more from Shane.

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