It’s summer! Put your kids to work by getting them to chores around the house and give them an allowance to begin a conversation about money. Experts say that children should be “earning” money, not just getting an allowance.
The three piggy bank method
This is an amazing way to teach your child to save–it works from 3 all the way up to the teen years. There are lots of ways to handle this method–with three separate jars, a three slot piggy bank, or a more elaborate version like the Moonjar Money Box found at Kohls This one has three categories: Bank (for saving), Store (for buying) and Share (for giving). A twelve year old might make her own banks, but the thinking is the same–learning to become financially thoughtful and responsible. You can break the pieces apart and hold them together with the yellow band. It’s a pretty cool way to be thoughtful about where your money goes (literally).
The coupon method
For smaller children who my be confused by money, use coupons to “buy” things instead. The thing he buys might be anything from a new toy, a fruit snack, or TV time. The point is, he’ll get used to thinking about how he “spends” his hard-earned coupons, which might awarded for things like good behavior or doing chores. Bigger things might cost more, so your child will have to make choices.
Set a good example
Take your child to the bank with you so he can begin to understand where real savings go. Open a bank account for your child and have them sit with you during the process. This might be better for older children, but usually the financial consultant has materials for the children, along with games or treats, like lollipops. Most banks have some kind of program for kids.
One way to motivate saving is to match contributions to savings jars or bank accounts. You can either set a standard amount based on a allowance and match any extra, or do it more informally, like when your child must decide whether to make a big purchase or save some. This can even be an early peak into how retirement accounts work!
Let them make a mistake
Your child will want to rush out and spend every last dollar of the birthday money he got. You can intervene and insist that he save, or you can allow him to get what he wants and blow the whole thing. One of two things will happen. Either your child will back off at the last minute when he realizes he’ll have none left, or he will spend it all and feel some remorse about it. Resolve NOT to give him the difference of that really awesome gaming console AND games. Instead, let him realize that’s got no money left for games.