Teaching kids about money: how (and why) we save

How can we help young kids wrap their minds around saving and delayed gratification? Well, here’s a start.

Learning delayed gratification as an adult can be tough. Teaching it to kids can be downright daunting. But it’s the heart of healthy financial habits – especially saving your money.

But why is it so important to help kids understand saving at a young age?

For one thing, it’s hard to pick that up somewhere other than at home. Kids, now more than ever, live in a world of immediacy. And with a million ads for different wants posing as needs (check out our post on that right here), it’s not easy for a kid to stay focused on their savings goals.

But kids who learn financial self-control can avoid a lot of financial pain in the future. When they save for and buy things themselves, they’re less likely to rely on other ways to finance themselves. Research shows it makes them less likely to overspend on credit cards or get caught up in predatory pay day loans in the future. Good lessons to learn, I’d say.

So, how do we do it?  Well… *rolls up sleeves* let’s dive in together. Here are some easy activities and habits that can help you teach your kids about saving their money:

Ages 3-5: the marshmallow challenge

Hear me out. I know this has been all the rage on social media, but there’s something to it. The game is simple:

  1. You offer your kiddo a marshmallow (or comparable small treat – my kids went for a chocolate chip).
  2. You say that they can have one marshmallow now, but if they wait two minutes, they can have two.
  3. See what happens and talk about it. It’s ok to tell your kids that waiting can be hard, but ultimately worth it. And hey, maybe have a marshmallow with them.

It’s simple, but effective. Bring up the experience when they need to wait for something. They’re very likely to remember it well.

Ages 5-12: three clear jars

Hopefully by this age, your kids can earn some money of their own. Maybe it’s allowance, earning money for chores, or those $12 dollar cheques Grandma sends on birthdays and holidays. Depending on your child and your preferences as a parent, these jars are an awesome way to help kids understand saving.

Give your child three clear jars. You can’t see into most piggy banks, which makes it harder to visualize the process of saving. Then, label the jars saving, spending, and caring.

  1. The saving jar is a place to save for something specific. You may want to include a picture of what they’re saving for on the front, like a toy or an experience. If you did the Wants vs. Needs activity from the last post, you can use that to jumpstart this part.

    Remember, delayed gratification is tough to learn, but that’s what we’re going for here. Kids may want to switch their goals on impulse – walking down the toy aisle or seeing a YouTube ad can sway even the strongest of wills. You can encourage their focus through kind reminders and maybe by providing an incentive.

    If my kids hold to their saving goal, the Bank of Parent chips in a bit toward it at the end, usually a couple of bucks. Or, you may want to consider adding interest – learn how to here.

    Let them purchase the item themselves. Giving money to a teller and receiving a thing can be a powerful experience for young minds. Even ordering it online and opening the package when it arrives works. When it comes to learning delayed gratification, the actual gratification part is pretty important. And be sure to talk with your kids about their feelings or experience with their purchase.

  2. The spending jar is for those impulse-kind of buys; a treat, a smaller toy, stuff like that. There’s joy to be found in the little things, even when they cost a little money. Learning to balance it with saving and caring is an important building block for financial wellbeing later.

    Kids don’t walk around with their money, so when they ask for something be prepared to say, “Sure, I can cover that now and you can pay me back out of your Spending Jar when we get home.” You’d be surprised how often this can make a kid be extra thoughtful about their choices.

    And when the jar is empty, that’s it. Tell them they can get something like that next time when their spending jar is replenished.

  3. The caring jar is so important. We’re all part of a community, there are people and causes that need support. Most importantly, kids need to know that they can make a real difference.

    Help them pick something based on what they like or really care about. Do they love animals? Your local Humane Society could be a good option. Have a young foodie on your hands? Community Grocery Shelves or food banks always need support. Are they an avid reader? Literacy programs or local libraries could fit the bill.

    Be sure to connect your kids with the outcomes of their giving. If possible, let them take it to the organization, just like when they use money from the other jars.

This jar practice can work for years. Be sure to keep the conversations going!

Ages 12+: their own savings account

If it fits, you may want to get your kid their own real savings account around this age. Work with them on it – pick a bank, get a card, online account access, the whole deal. Make it for just for savings at first and encourage them to deposit money when they can. You may want to adapt some of the ideas from the saving jar technique.

Kids will start to learn about checking their balance, getting a statement, all those good mini-adulting behaviours. Remember – keep talking to them about it. An open line of dialogue around their account and their money helps keep conversations going and questions coming.

Plus, kids will start to earn a little interest too. In fact, that’s what we’re talking about in our next post, You can teach kids about compound interest?!