Teaching Kids How to Save Money: An Age-by-Age Guide

Teaching kids how to save money is difficult, especially when there are so many temptations to buy everything they lay eyes on. If you can find a way to encourage your children to save and have fun doing it, it will benefit them tremendously in the long run, especially when it comes time to save for college. In fact, a study in the Journal of Children and Poverty found that youth with a savings account in their name were about six times more likely to attend post-secondary school than those who did not have a savings account.

education illustrationHow Can I Motivate My Children to Save for College?

In an article for College Savings Initiative, Cheryle Hamilton writes that the actual concept of saving is not something that is ingrained in the minds of the majority of the population. Rather, people have to be in the habit of saving consistently to develop a saving mindset. Furthermore, she states that opening a savings account for a newborn is simply not enough. Hamilton says, “Education is needed in order for growing kids and their parents to see all the perks for their kid’s superior education.” Children need to physically see that their saving habits are making a positive impact towards their future education.

Motivate your child to save for college by starting the conversation early in their life. The sooner, the better so neither you nor your child feels any additional stress right before the college application process. Here are some pointers, broken down by age group, so that you can present the concept of saving appropriately.

Toddlers through Kindergarteners

Educating children about money at this age may seem silly, but there are creative ways to do it so they begin to develop basic knowledge during this stage of life. They may not understand the true value of money, but they can start to differentiate between a penny, nickel, dime, and quarter.

What you can do:

Begin by learning name recognition with a coin identification game. Be sure to supervise toddlers when practicing with real coins to avoid swallowing. Preschoolers and kindergarteners can help you clip coupons (using children’s safety scissors!), allowing them to be hands on. While doing this, you can explain what coupons are and how they help save money.

Elementary-aged Children

At this time in your child’s life, he or she may be receiving a weekly or monthly allowance or even gifts of money from relatives for birthdays and other holidays.

What you can do:

This is a great time to take a trip to your credit union or bank to help your child open a junior account and encourage him or her to make regular deposits. Diamond Credit Union offers a Junior Membership account for children ages 12 and under. Having their own account will help to encourage financial best practices, teaching smart spending that will follow them through all of life’s big moments. Children will see that it’s fun to watch their money grow in their savings account rather than spending it.

Intermediate through Middle School

As your child gets older, they are able to understand basic monetary terminology such as debt, budgeting, savings, and checking account in a more complex way.

What you can do:

Encourage your child to make wish lists of the things he wants. Explain how to create a budget so he can visualize how much he has saved and how much he need to save to satisfy his wish list. You can also show him how to comparison shop, so he develops the habit of taking his time and doing a little research before spending money, ensuring he finds the very best deal on a product before spending.

By the time your child is in middle school, you can begin to discuss how much college costs and why having good grades and a college savings account is so important. According to a recent study, the average price for a “moderate” college budget at an in-state four-year public college is about $24,000.

You may want to create some sort of visual together to show the amount of savings he has now and how much more he needs to save between now and college in order to afford it. Discuss the concept of debt and how he can avoid it by saving and spending wisely.

High School

By this point in your child’s life, hopefully he or she has developed a sense of responsibility and financial knowledge to continue saving on their own. With college just around the corner, this is a great time to discuss what the next steps will be in terms of education.

What you can do:

Encourage your child to apply for scholarships that can help to offset the cost of college. With thousands of scholarship opportunities out there, there is bound to be something that suits your child.

If you have any questions about Diamond’s Junior Membership, contact a Diamond Member Services Representative for more information.

The views, opinions, and ideas articulated in this blog are just that, and should not be construed as financial or legal advice. The writers of these blogs are educated on the topics they are writing about, but they are in no way licensed financial advisors or registered investment advisors. Diamond Credit Union is not responsible for any actions a person may take as a result of the information they read in one of our blogs.