Starting a savings account for a child may seem odd, but a savings account is an excellent tool to teach children about responsible money habits. In the age of electronic banking and online spending, teaching your children how to handle money is critically important. Not only will your child learn how to save, they will eventually learn about online safety when it comes to banking, credit, and shopping.
Start Them Young
One of the first things parents should teach children is the value of money. A good tip is to encourage children to save for things that they want to buy. Rather than buy your child everything under the sun, let them pay for some things too. When children learn the value of money, they become more realistic about the things that they want.
Reward Them for Meeting Goals
Give your child savings goals and then reward them for making those goals. If your kid rakes in the dough over the holidays, suggest that they save 50-70 percent of it for six months. If they can do that, then treat them to something fun. Teaching children about financial goals is important. Encourage them to keep track of their growing bank balance. Use your cell phone to let them see interest and deposits. A good tip is to reward them for good grades, good behavior or achievements by adding to their savings account. That way you are helping them meet their savings goals.
Make a Big Deal About It
It is important that kids realize how important good money handling skills are. You can tell children a lot of things, but if you show them in such a way that they easily come to the realization on their own, the lesson will become easier for them to accept. Those are the lessons that stick with children for life.
Sit down and balance your checkbook where the kids can notice what you are doing. Kids absorb a lot of awesome skills just watching what adults do. If you want to teach your child to handle money responsibly, then show them that you handle money responsibly.
Utilize Banking Apps
Show your child how to use banking apps on your cell phone. There are many apps on smartphones that can help you manage money and track your banking. Introduce this to them early, so that they understand how quickly money comes and goes. Have them practice with their allowance or Christmas/birthday money. This will teach them how easily money can come and go.
Don't Sweat Failures
Children are human too. If they decide to blow all of their money on something simply explain to them that later they may want to use their money for something else. When they spend all of their money on something, and they will, don't make a big deal out of it. Just bide your time. They will want something sooner or later and if they cannot pay for it themselves then tell them no. Explain why they cannot have something simply because they want it. It will drive home the importance of handling money responsibly.
Give Them Chores and Pay Them
You don't have to pay them a fortune, but you should pay them for doing some chores, but not all chores. It is a good idea that children have a set of chores that are routine, but if they want to earn an allowance, then give them extra chores to do. A good stipulation is that 50 percent of what they make goes into their savings account. It is difficult for children to save and reach saving goals when money comes in infrequently.
Set Them Up to Succeed
Sit down with them and talk about their financial goals. If you have a 10-year-old and they want a car when they are 16 then help them set up goals to make that happen. Talk about end goals and then make smaller savings goals so that they can see the progress. Letting them succeed will drive home all the lessons about handling money well.
It is important to talk about money, but it is also equally important that money not become the primary focus of their world. Being frugal, learning to save, and building wealth are healthy goals. A total focus on money is not all that healthy. Bridge the difference with understanding and knowledge and avoid greedy behaviors.