By Rachel Lane, Contributor, Fea Money Financial Literacy School. Photo Credit Unsplash
Money is one of the hardest things to talk about, especially with your kids. However, if you want to set your children up for financial success, it’s essential that you do talk about money. Taking the time to develop a habit of saving as a family can make a world of difference when your children grow up and leave the nest.
You should make sure that your children see you and your spouse regularly making good financial decisions like setting aside money for saving. At the same time, make sure that you talk about both your good financial decisions and your bad ones so that your kids can learn from your experiences.
Why Should We Save as a Family?
Everyone knows that children tend to be quite rash and impulsive and would rather spend money on candy than on saving for college. However, if you can mold your children’s thoughts about finances, you may be able to save them thousands of dollars of debt later on. Teaching your kids to think more about the future and less about the present will help them save more and spend less.
At the same time, parents need to follow their own advice and model good financial decisions. You should be open with your kids about the benefits that you have gained from saving and involve your kids in the financial decision-making process as much as possible.
Let your children see that it’s a team effort. Perhaps you can open up a CD just for your kids, explain to them the different options they have once the CD matures, and allow them to make the decision that they think is best.
Establish a habit of saving in your family, and it will become just one of those things that your family does. It will make saving a little easier because everyone is coming from the same viewpoint, and you can encourage one another to meet your savings goals.
All Right, I’m Game, So How Do I Do It?
There are a variety of different ways to save as a family. First, you obviously can talk about savings with your kids. You can also teach them various financial tasks like writing a check and keeping track of expenses on a debit card when they get older.
One way to teach good financial habits is to give your kids an allowance. It will help teach your children how to spend and save money.
Experts recommend different amounts. Some say $1 a week per age of the child. This would mean that your 12-year-old would receive $12 a week or $48 a month in an allowance. Others suggest a dollar amount equal to ½ of the age of your child a week, meaning that your 12-year-old would receive $6 a week or $24 a month. You may also choose to opt for a standard monthly amount, as my parents did. I started with $10, which was raised to $15 when I was a teenager.
Please Note: Any references to dollars, dollar amounts, or the dollar sign in this article are used simply as a means of example, so please substitute your local currency and rates.
In the end, though, the amount does not matter as much. It’s about figuring out what is going to be the best fit for you and your family. It may be a good idea to start giving your children a smaller allowance so that they can learn good saving habits before receiving a larger amount.
In addition, you also should consider what you’re expecting your kids to use the allowance for. Perhaps it is just for their own spending and saving and can be a smaller amount; however, you might consider a larger allowance if you want your children to pay for some expenses like a cell phone or gas.
You might also consider incentivizing your children to save by rewarding your kids with a “parent match” to their allowance if they save it after a month. A similar option would be to double any money that your kids put toward saving for college. This inducement likely will encourage your kids to spend less at the mall and more on saving for college, a car, and so forth.
If you aren’t as sure about giving your kids an allowance but still want to teach your kids how to save, consider giving them pocket money here and there to assist them in learning how to save. Perhaps you give your kids $20 to spend at the fair, but whatever they save, you’ll double. It’s likely that your children will be motivated to save and think more about future financial goals instead of immediate wants.
As parents, you have an amazing opportunity to set your children up for success in so many areas, including financially. Choosing to save as a family is a great way to not only bond as a family but also develop good financial habits together. Happy saving!
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