Experts say that children can grasp the concepts of saving and spending as early as three years of age. By age seven, a child’s spending habits are already forming. Introducing delayed gratification early on will set up your child for success as an adult. The practice of waiting for something you really want is tough at any age, but when started early in life, the habit is likely to stick. Here are some ways you can practice saving and spending skills with your child:
Create Save, Share, and Spend money jars. When your child receives money for birthdays or doing chores, have your child distribute the money among the three jars. A bigger percentage should go into the save jar. This helps instill a strong saving habit early on. As your child gets older, their spending will increase because they are doing more things independently like going out to eat with friends and driving. At that point, there will be a slight shift of the amount from saved funds to the spend jar.
Help your child set savings goals. Have your child start saving for that toy they have been begging you to buy. Ensure that the goal is realistic and can be reached in a reasonable amount of time. For the more expensive items, make a deal with your child that if they save half, you will pay for the rest. Each time money goes into the save jar, count it up with your child to show them how it is growing. After saving and waiting diligently, your child’s excitement and pride over getting that item will be much more than you could ever provide by just giving it to them.
Talk through purchasing decisions with them. Shopping together at the grocery store is a great opportunity to teach children about making choices with money. Showing them price differences on name brand versus generic products, giving them some purchasing power, and discussing how badly something is needed (or not) are examples of how to get them involved. Presenting your child with buying decisions they must make on their own is the best way to learn. Money isn’t guaranteed, when it is gone, it is gone. Seeing the money being spent allows them to focus on spending very wisely.
Children learn by watching their parents deal with money. Talking to them about responsible money management is a way to make sure they are not picking up on the wrong assumptions about how money works. If you would like more tips about teaching your child about money, email our financial literacy team of experts at Fili@myfirstnational.com.