5 Ways to Encourage Kids to Save
By Len Penzo, Guest Columnist
As a parent of two children, I realized early on that trying to teach them the importance of saving money is a tall order. Let's face it, how many 9-year-olds care about stuff like the importance of spending less than you earn, or effective methods for building a retirement nest egg?
That's not to say it can't be done. The trick is to make the lesson fun -- or at least unabashedly compelling.
In my household, I've employed five strategies for encouraging my kids to save a portion of the income they receive each week for successfully completing their chores.
Give them a magic money jar. For younger kids, put a clear plastic or glass jar in their room and encourage them to put their coins in it. Then, every time a dollar or two in change has accrued in the container, secretly replace the coins with paper bills while they are away at school or otherwise out of the house. Magic! Your kids will learn how quickly small savings can add up to something tangible.
Teach them about compound interest. One of the most fun ways for slightly older kids to grasp the true power of compound interest is to offer them a hypothetical job where they get to choose how they want to be paid for the first month: a flat fee of a half-million dollars, or a single penny on the first day and doubling it every day thereafter for 30 consecutive days. Most kids will naturally go with the former -- and once you show them why they made the wrong choice, I promise you they'll never forget it.
Set a goal. One of the best ways to encourage kids to save money is to make the effort worth their while. If you know your child really has her eye on a relatively expensive item, tell her the only way she'll get it is if she saves for it. Of course, it always helps to have full cooperation from your extended family members at birthday time and during the holidays. Earlier this year my preteen daughter spent upwards of $300 for an iPod using money she had saved on her own.
Start a competition. You can also take advantage of any sibling rivalry that may be bubbling under the surface by challenging your kids to see who can save the most money in a specified amount of time, with the winner getting a "savings bonus," courtesy of the Bank of Dad.
Match their savings. This strategy often works well with kids who prefer to spend their cash as soon as they get it. My 14-year-old son still has trouble saving his income without a little encouragement, so I give both of my kids a little added incentive by matching their savings. By the way, it doesn't have to be a straight dollar-for-dollar match -- I often vary my kids' saving bonus, depending on how generous I feel. For it to work, it just has to be irresistibly enticing.
When it comes down to effectively teaching your kids the benefits of saving money, there are lots of creative strategies you can consider. Just remember, whatever you do, make sure to save the economics lecture for high school.