Kids who learn how to save at an early age gain a big advantage, setting them up for future success in managing money. However, this important life skill doesn’t develop on its own. Parents and caregivers play a crucial role in guiding children toward smart saving habits.
Here are four practical steps to help children start saving money, whether it’s from birthday gifts, a first paycheck, or coins found in the couch cushions.
1. Talk to Your Kids About Money
Before your child decides what to do with their cash, it’s essential to talk about money and its value. According to Caroline Tanis, a New Jersey-based financial advisor, discussing money with children helps them think about how they want to use it.
“Ask your kids how they plan to spend their money and how much they want to save,” Tanis suggests. “By considering these questions, children can start to feel empowered about managing their money.”
2. Find a Strong Savings Account
Kelly Klingaman, a certified financial planner from Austin, Texas, advises opening a savings account for children where they can earn interest on their balance. This teaches kids the power of compound interest, where interest earned generates more interest over time, allowing savings to grow faster.
When selecting a savings account, look for one with no fees, no minimum deposit, and a high interest rate. Many accounts offer online and mobile access, making it easier for both parents and kids to track balances.
“Parents can even open an account in their own name for a young child, including infants, making it truly never too early to start saving,” says Klingaman.
3. Encourage Goal-Setting
Once the savings account is set up, help your child establish a clear savings goal. Natalie Runyon, a mother of two from New York, emphasizes the importance of goal-setting because it teaches her kids about delayed gratification.
“By learning to delay purchases for bigger goals, kids develop a better understanding of the value of their money,” Runyon says. This is particularly important as kids encounter spending temptations, especially as they grow older.
Many savings accounts offer apps that let parents and children monitor their progress and even use savings goal calculators to stay on track.
4. Pair Smart Saving With Smart Spending
Teaching children to save is just one part of the equation. They also need to learn how to spend wisely. Consider pairing a savings account with a mobile-focused spending account or app that includes debit cards and budgeting tools. These features help kids manage their spending while allowing parents to set limits and monitor their spending habits.
“Having control over their spending helps children reach their savings goals faster,” says Klingaman.
Helping children learn to save and spend responsibly is a critical part of teaching personal finance. By starting early, kids can feel more comfortable with managing money and learn how to balance spending for immediate wants with saving for future needs.
