Teach Your Child the Benefits of Saving Money

April 8, 2009

in Personal Finance

Probably the best way to teach your child the benefits of saving money is the same way you were taught as a child ? buy a piggy bank.

Children learn by example. They also learn by repetitive lessons. For example, buying a piggy bank and putting coins in on a daily basis is the foundation by which children will begin to understand every aspect of saving and spending.

Whether you purchase a piggy bank or use a small glass container, the children can visually see each day that by putting coins into the bank, the money begins to accumulate.

Another way to illustrate the importance of saving is suggested by Teach Kids How. They offer this advice: “Once you have at least half of the bank filled, take the money out and show them the empty bank. Then explain to them that this is what their bank will look like without any money in it.”

An effective method to show the child what happens when they spend money is to tell the child that he or she can buy one toy as a reward for saving. Take your child to a toy store or go online and ask the child to pick one item. Write down the price of the item. Take the money out of the piggy bank and count it with the child.

Let’s assume that Johnny saved $12.00. The price of the toy he chose is $16.99. Now explain to Johnny that if he wants the toy he will have to save another $4.99. This will empower the boy to continue to save to buy that special toy.

What a great day it will be when Johnny comes running up to you and says, “Mommy, I have enough money to buy that toy!”

The next step in the learning process is to take the money to the bank and deposit it in a savings account. Explain what a savings account is and let the child go through the process at the bank. Let the child hold on to the bank book and let him see his name on the book. Explain that every time you take him to the bank to deposit money, the number in the book will become higher and higher.

Most experts agree that allowing a child’s first piggy bank savings to be used to buy a toy is necessary for them to learn the importance of saving. Eventually, children can set aside money for their savings account and still have money left to buy another toy.

This learning process requires that you consistently praise the child for saving and, in some cases, reward the child by matching the amount of money in the piggy bank. This is how many of us learned to save as children, and it has served us well.

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