One afternoon, I came home from work, and my son, who was five years old at the time, was in his room with coins all over his floor and dollar bills crunched up in little balls.
He told me he decided to open up his piggy bank and take out all of his money.
As I sat on the floor with him and we unraveled the bills and put them back into the bank, I explained to him that we don’t want to touch this money just yet. We want to save it. I also explained that money is very germy and we should never put it in our mouth and always wash our hands after handling it!
From an early age, he started understanding the concept of money and that you need it to buy things. In fact, for special events, such as holidays or birthdays, he’ll often hand me a present he wraps all by himself. The paper is typically ripped and it is completely covered in scotch tape, but he is so proud.
I recall one time he took a framed photo of the two of us from his room and wrapped it. He told me that he really wanted to buy me bedroom slippers, but he “didn’t have a car and didn’t have any money.” The truth is that he does have money, but just doesn’t necessarily know what to do with it.
Now, I am in no way suggesting he spends his money on me, but once our children reach an age when they understand that things cost money, it is the time to have the conversation about wants, needs, and especially savings.
Up until recently, my son had not received an allowance. We are slowly introducing an allowance in return for small jobs he does each day around the house. He makes his bed and feeds his fish and he is so proud of doing so.
However, most of the money in his piggy bank comes from gifts. A dollar here and a dollar there; it starts to add up. We did open a bank account for him with some initial savings and we will of course share those details with him as he gets older, but for now, his piggy bank will suffice.
When to begin giving an allowance is up to each individual parent. I personally feel it should kick in once a child is capable of understanding the concept of working and earning money and is able to demonstrate a bit of self-control when it comes to spending. The ultimate goal is to raise little savers.
As parents, we of course want to provide the “needs” for our children as long as possible; food, shelter, essential clothing, education, even school supplies. And, while we certainly give them their share of the “wants,” when they start earning an allowance or begin working, it is important for us as parents to manage the “I have the money and want it now” conversation. The wants being that new toy, money to go to the movies, an app… anything that is not a necessity.
First thing is first. Take the time to empty the contents of the piggy bank or review what is in a savings
account at the bank and count it with your child. Get an understanding of exactly how much they currently have. This way, once they add to their savings, they will be able to keep track.
My son knows I certainly like to stay organized and organizing finances is an important practice to teach kids.
Next comes the conversation about spending options. We can’t always get everything we want and sometimes it takes time to save for something special. Occasionally, kids will immediately spend their allowance on something. Adults do it too. However, if we allow them to succumb to impulse buying each time they get allowance, we will never teach them to be savers. It’s simple, spend all of your money now and you won’t have any left!
If your child insists on wanting something now, but as a parent you know they would be better off waiting, simply try saying “ok, you can spend the money now, but if you do, you won’t have any left for something bigger and better. Sometimes better things come to those who wait and save.”
Finally, while I’m all for starting our kids off with saving money in a piggy bank at home, it is a good exercise to begin teaching them the benefits of saving money in a savings account in the bank. Besides it being safe and protected, banks will often pay savers who have accounts with them in the form of interest. In other words, the bank pays savers a certain amount of money just for keeping the money at that particular bank.
Now that is interest-ing! Save money in a bank, and you can make even more money!
Want to take this lesson further? Give us your email and receive a free download to a story that you can read with your child called “Moolah is Hungry,” educate yourself even more on how to explain saving money to kids and share a fun activity called “Color in Moolah,” plus a saving money activity bonus!
