10 Tips to Teach Your Child to Save Money

Every year, one day in April—April 22—is designated as “Teach Children to Save Day,” a day dedicated to teaching children about money from an early age. But if you have children, you should devote every day to it. According to a 2020 T. Rowe Price survey, only 49 percent of adults rate their personal finance knowledge as “excellent” or “very good,” making the financial literacy of the next generation even more critical.


Saving money is a habit that takes time to develop, and some adults have yet to master it. Consider the following: As of November 2020, 63 percent of Americans were living paycheck to paycheck, with no emergency savings set aside. Many people have found it especially difficult to save this year. However, to the extent possible, it is beneficial to go over the lessons that can help your children learn the skill in both good and bad times. With that in mind, here are ten actions you can take to get your kids—and possibly yourself—on board with saving. 

1. Discuss the difference between wants and needs.

The first step in teaching children the importance of saving is to assist them in distinguishing between wants and needs. Explain that basic needs include food, shelter, basic clothing, healthcare, and education. Wants are all the extras, such as movie tickets and candy, as well as designer sneakers, a bicycle, or the most recent smartphone. You can use your own budget to demonstrate how wants must take a back seat to needs when it comes to spending.

2. Allow them to earn their own money.

According to a survey conducted by the American Institute of Certified Public Accountants (AICPA), two-thirds of parents paid their children an allowance in 2019, with children earning $30 per week on average for five hours of chores. Allowing your children to earn and save money provides them with the opportunity to learn how to use it if you want them to become savers. When you give them allowances in exchange for chores, they learn the value of their efforts.

3. Establish Savings Objectives

Being told to save without explaining why may seem pointless to a child. A better way to motivate children is to assist them in defining a savings goal. If they know what they want to save for, assist them in breaking their goals down into manageable bites. If they want to buy a $50 video game and get a $10 allowance each week, for example, help them figure out how long it will take to reach that goal based on their savings rate.

4. Provide a location for saving

When your children have decided on a savings goal, they will need a safe place to keep their money. This could be a piggy bank for younger children, but if they're a little older, you might want to set them up with their own checking or savings account at a bank. They'll be able to see how their savings are adding up and how far they've come toward their goal.

5. Request that they keep track of their spending.

Knowing where your money is going is an important part of becoming a better saver. If your children are given an allowance, having them write down their purchases each day and total them at the end of the week can be an eye-opening experience. Encourage them to consider how they spend and how much faster they could reach their savings goal if they changed their spending habits.

6. Provide Savings Incentives

The company matching contribution is one of the reasons people save in their employer's retirement plan. After all, who doesn't enjoy getting free money? If you're having trouble motivating your children to save, you can apply the same logic to boost their efforts. If your child has set a large savings goal, such as a $400 tablet, you could offer to match a percentage of their savings. As an alternative, you could give your child a reward when he or she reaches a savings milestone, such as a $50 bonus for reaching the halfway point.

7. Allow for Mistakes

Allowing children to learn from their mistakes is an important part of putting them in charge of their own money. It may be tempting to intervene and steer children away from a potentially costly mistake, but it may be better to use that mistake as a teachable moment. That way, they'll know what not to do with their money in the future.

8. Take on the role of their creditor

One of the fundamental principles of saving is to not live beyond your means. If your child wants to buy something but is impatient about saving for it, becoming your child's creditor can help teach them a valuable lesson about saving. Assume your child wants to buy something for $100. You could "lend" the money and collect payment with interest from the allowance you provide. The lesson you want to teach is that saving may entail delaying gratification for a longer period of time, but the item you want to buy will cost less if you wait.

9. Discuss Money

According to the 2020 T. Rowe Price survey, 40% of parents have never discussed the stock market with their children, and 32% have never discussed retirement savings with their children. If you want your children to learn about saving, it must be a continuous conversation. Whether you schedule a weekly check-in to talk about money or incorporate money discussions into your daily routine, the key is to keep the conversation going.

10. Set a Good Example     

According to the same T. Rowe Price survey, 23% of parents have no savings for retirement, emergencies, college, or other financial goals. Being a saver yourself can help your children become savers. Creating an emergency fund, opening a 529 savings account, or simply increasing your 401(k) plan contributions are all steps you can take to encourage saving as a family activity. You could also decide to save for a large-screen TV, a family vacation, or a pool as a group.

In conclusion

Teach Children to Save Day occurs only once a year, but there are lessons to be learned for both parents and children all year. Making saving a regular part of your child's routine, if you're a parent, can lay the groundwork for a prosperous financial future. The advice provided here is a good place to start.


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