Getting Kids to Start Saving Money

To mark America Saves Week, a number of new studies underscore the fact that America doesn't save enough. One survey, which focused on children, found that parents overwhelmingly feel it's their responsibility to teach their kids about money and savings but that they don't always follow through. Of 2,000 parents interviewed by DoughMain.com, a financial-education and family-organization Web site, 63% said their children under 18 have a savings account; but only 43% of the parents review bank statements with their kids monthly, and just 28% of children have looked at their account balances online.

I think parents have good intentions, but they also have a lot on their plate. As a result, they sometimes give short shrift to thrift. For time-strapped parents, here's my easy-to-follow guide to teaching your kids to save.

Preschool through primary grades:the piggy-bank years

Young children think about money in very concrete terms, so saving should be as hands-on as possible.

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Start with a piggy bank. Banks come in all forms, from traditional pigs to talking ATMs, and they're great as both teaching tools and toys. For piggy banks with a twist, take a look at www.msgen.com and www.prosperity4kids.com. For a fun lesson in saving, see the books and other materials at www.itsahabit.com.

Set simple goals. Remember that children this age don't have a long time frame, so goals should be short-term and easy to achieve. For example, kids could save money for a trip to the dollar store, or tape a picture of a coveted toy to their piggy bank so they don't lose sight of their goal.

Elementary through middle school:the allowance years

Tweens know what money can buy and are able to plan further into the future. So they're prime candidates for getting an allowance that's tied to specific responsibilities. Requiring them to pay for certain purchases -- collectibles, entertainment, trips to the mall -- gives them an automatic incentive to save.

Divvy up their allowance into pockets of money for spending, saving, giving and even investing (like some of the piggy banks mentioned above do). If you don't want to take the trouble to parcel out your kids' allowance into pots, a simple alternative is to require them to save, say, a flat 10%. (An interactive program at www.kidnexions.com gives children a good introduction to saving; $19.95 with a 35-day free trial.)

Open a bank account, if they don't already have one. But be careful to explain how the system works. Even at this age, banks can be a mystery to children, who are often horrified to see their money disappear. (In the DoughMain study, 51% of parents said they give their children an allowance, but only 4% require them to deposit money into a bank account.)

Match what your children put aside as a way to encourage them to save. In the DoughMain survey, 38% of parents said they match their kids' savings. Give them a reward. Once your children have achieved their goal, let them spend the money and enjoy the payoff for their efforts.

High school: a taste of the real world

Now's the time to build on the small steps you've started earlier. Whether your teens get an allowance or earn money of their own, you can expand their financial responsibilities to include gifts, clothing, concerts, cell phones and car expenses. Clue them in to the cost of college. If they have a job, it's not unreasonable to expect them to save a chunk of their income for college expenses. Encourage them to have their paychecks deposited directly. If the money gets into their bank account, it's more likely to stay there.

Ramp up their interest -- literally. Interest rates are paltry, so make sure they're earning as much as possible. If they're budding investors, they can purchase a small number of shares through Sharebuilder.com or MyStockDirect.com, which links to more than 100 companies that sell stock directly to the public.

Start an IRA. If your children have earned income from a job, in 2012 they can contribute an amount equal to their annual earnings or $5,000, whichever is less. You can seed the account, as long as you don't exceed their actual earnings.

Follow Janet's updates at Twitter.com/JanetBodnar.