Saving

Getting Kids to Start Saving Money

Tips for turning your good intentions into money in the piggy bank (or a real one) for preschool through high school.

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.

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.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Resist the Impulse to Buy These 14 Holiday Gifts
shopping

Resist the Impulse to Buy These 14 Holiday Gifts

Don't let those holiday sale promotions persuade you into buying something now that will be much cheaper later.
November 18, 2021
The Berkshire Hathaway Portfolio: All 41 Warren Buffett Stocks Ranked
stocks

The Berkshire Hathaway Portfolio: All 41 Warren Buffett Stocks Ranked

The Berkshire Hathaway portfolio is a diverse set of blue chips, and increasingly, lesser-known growth bets. Here's a look at every stock picked by Wa…
November 16, 2021

Recommended

TOD Accounts Versus Revocable Trusts – Which Is Better?
savings

TOD Accounts Versus Revocable Trusts – Which Is Better?

Both help you pass down assets while avoiding the time and expense of probate, but one comes with a lot more flexibility than the other.
December 2, 2021
Earn 7.12% With Series I Bonds
Basics

Earn 7.12% With Series I Bonds

A savings or money market deposit account is best for quick cash, but I bonds can fit into a longer-term savings plan.
November 29, 2021
Honey, We Need to Talk About Money
Women & Money

Honey, We Need to Talk About Money

Instead of focusing on the numbers, couples might have more success discussing their goals.
November 24, 2021
How to Choose the Right Payment App
banking

How to Choose the Right Payment App

Using PayPal, Venmo, Zelle and other apps is convenient, but there are pros and cons to each.
November 23, 2021