How to Teach Your Kids About Saving and Spending

You can never be too young to learn the true value of saving. For children, however, the concept of money is much different than the reality. But that doesn’t mean you can’t teach them how to save—even their pennies—responsibly. 

Once your child reaches the age of about five or six, they start learning how to count and add in school. Of course, their main focus is probably on their favorite new toy, or one they don’t own and have been begging you for. Use this as an opportunity to merge what they’re learning in school with their wants and desires in a financially educational way. 

In order for them to save money, they will need to make money to put away, so don’t forget about their allowance! Reward completed chores with small amounts of cash that can be used towards whatever they desire, with your permission, of course. Also, if they choose to start a lemonade stand or sell their old toys at the next yard sale, the money earned can be added to their savings. 

Money from birthdays or holidays can be added to their savings fund, as well. You can even help them out by matching every dollar saved with 25 – 50 cents. At the end of each week, sit down and count how much money they have in total and how much has been added from the week before. 

Use a clear jar where their money can be easily displayed. It’s smart to set a goal to start, be it a new toy or activity, to financially work towards. Once they see that they are getting closer and closer to the amount needed, it can push them to work harder and even add an extra chore to their list. 

Once they meet, or hopefully exceed, their set goal, discuss how they would like to use it. If they are ready to go out and purchase their hard-earned prize, be sure to only take out the amount needed. This is a good way to teach budgeting. For example, if they plan to spend $10 on a new toy, but have $20 saved, be sure to only take out the amount needed. If you bring the total amount with you, they may decide to spend it irresponsibly on a random purchase. Leaving the rest at home gives them a jump start toward their next savings goal. 

During this learning process, be sure to hold your children responsible for the money going in and out of their savings fund. Some things take longer to save for, but are more valuable in the long run. The sooner they understand that, as well as the time and effort it takes to build savings, the sooner they will understand the beginning steps of financial responsibility.