Ask any financial expert what kids should learn early on about money and he’ll tell you to teach your child how to save. This is excellent advice, but the reality is that saving means different things to different kids. Your child might not see the saving task the way you do, and that translates into the need to be very conscious of how you go about engaging your child in saving strategies.
For some kids, saving money means only making it “grow”—i.e., your child can get latched on to the total saved. In his mind, the objective of saving doesn’t go beyond seeing how high that number can get, which can translate to money hoarding. To avoid this problem, it’s a good idea to work with your child to set specific financial goals for the savings.
Out of Sight, Out of Mind
Kids are very emotionally oriented during their early years, primarily because they are still developing the experience set that aids logical reasoning. As a result, kids tend to focus on what is immediately present. Some methods of saving, such as putting your child’s money in a bank account, might make your child forget they even have the money with which to work. Fix the issue by keeping your child’s saving in a readily accessible container such as a piggy bank or play safe. Encourage your child to note his savings amount briefly on a regular basis, such as when you give him his weekly allowance, and then steer the conversation to what he could do with the funds or how long it will be before goals are met.
You Want Them to Spend
The whole idea behind saving is to have money readily available for a later date. When you teach this to your child, it can be problematic because he starts to see that he could save for a plethora of items—he might have trouble picking which items to save for, or he might become materialistic as he focuses on putting money aside for purchases. A terrific way to combat this is to limit the number of items he can purchase with his savings at a time while suggesting some sensible, age appropriate things to buy. You also can investigate making saving a certain percentage for charity a requirement so that he learns that not all spending is self-centered. When he does buy something with savings, incorporates a discussion of how consumer purchases improve the overall economy, working in lessons about supply and demand.
Power, Excitement and Frustration Are “a Dollar Away”
For many children, saving means access to power. Suddenly, your child can make decisions about when to spend and what to buy. The bad news? Your child likely will blow a lot of his savings following his emotional impulses, at least at first. The good news? Your child’s initial purchases can reveal the quirks of his personality, and every purchase, good or bad, is an opportunity to either teach or praise.
The power that comes from having a little pocket money available can be very exciting for a kid, so even small purchases from savings might make your child happier than usual. That’s okay, especially if he knows he did excellent research and got a great deal. On the opposite side of the spectrum, though, with money comes some responsibility. It can be a chore, for example, for your child to keep a few receipts or note his spending in a notebook. He might see saving as frustrating if he doesn’t have enough guidance along the way. Let him know it’s perfectly fine to ask for some help as long as his independence improves over time.