Teach Your Kids to be Savvy Savers!
November 14, 2008
Being a mom, and working in the banking industry, I am more than aware of the importance of teaching my son to be a smart saver and to make the most of his money. As kids, how many of us would take our allowance, head down to the candy store and spend it all on wax lips and pixie stix?
But when do you start? As soon as a child can count and begin to distinguish between coins, he or she is ready for their first financial strategy: Don’t eat the money. Here’s how to teach about money at each stage.
Toddlers and Preschoolers
At this age children can sort coins, learn their value, and begin to understand how money gets converted into “things”.
5- to 7-Year Olds
By the time they start school, many children are ready to receive an allowance. The goal is to give your child the opportunity to budget, spend and save his or her own money. Most experts agree an allowance should not be linked to chores or grades. Extra money for special jobs such as cleaning out the garage is fine.
The amount of the allowance depends on which expenses the child is expected to pay, so sit down with your child and map out a weekly or monthly budget. One suggestion is to pay 50 cents per week for each year of the child’s age.
You can encourage saving by dividing the allowance among three jars. Money in jar 1 can be spent on whatever the child chooses. Jar 2 money is saved for a more expensive item, like a toy or book. Jar 3 is reserved for long-term savings, such as a college fund. Pay interest (even a few pennies at a time) to jar 3 money. Children are fascinated when money makes money.
8- to 10-Year-Olds
Make a trip to the credit union to open a savings account. Let your child fill out the deposit slip, and explain that the credit union will pay interest.
Include your child in family discussions of finances, such as budgeting and planning for family vacations. Explaining how you decided to forgo the fancy sports car in exchange for a sedan and a family trip to the beach can teach about trade-offs and your family’s values.
11- to 13-Year Olds
If your child shows interest in the stock market, choose a few stocks, such as McDonald’s and Disney, and follow them for a few months. If the child has earned income from a paper route or baby-sitting, for example, he or she can set up a Roth IRA that will accumulate a tax-free retirement nest egg. A $1,000 investment at age 12 can grow to over $150,000 at age 65.
MCCU offers Kid’s Club Savings Accounts – open it and earn interest with as little as $5.00. It’s a great way to teach your children how to save money and watch it grow.
Questions or Comments? E-Mail me at blogger@matadorsmoneymatters.com.
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