Teaching your child to save money.

[Maisie]

How do/did you teach your child to save money?

At the minute I give my two oldest (15 and 13) £10 pocket money per week (my daughter also earns money from babysitting). This is fun money. Everything else they need comes from us. I want to teach them to save.

I thought about having them put £5 per week in the bank and keeping the other £5 to spend on whatever... sweets or magazines etc. The problem is, i'm not sure how to help them decide how to handle the money thats in the bank. Should I tell them not to withdraw it at all, or use it to save for a bigger item they might need. But that would mean withdrawing the whole amount once they have saved up enough and going back to zero again. Or maybe save up to a certain amount then put half into another account and don't touch that at all.....

I'm not the greatest at saving (didn't have anything to save as a kid so didn't learn!) so I want them to learn to value money and not just waste it.

Any suggestions?

 

[VRBeauty]

Maisie - I don't have children, but I can tell you one thing I wish my parents had done differently.

My parents shielded us from all their financial discussions, so we never had a clue what decisions they were making and what choices they were juggling. I'm sure it's largely cultural. Part of it might have been due to the fact that they really did struggle to make ends meet for many years - my parents went without a lot and sacrificed a lot for us kids, and I suspect they didn't want us to be burdened with that knowledge. Still, I wish they had given us a little glimpse of their reality and their decision-making process, to help prepare us for the realities that we would be facing when we grew up. Obviously you don't have to tell them everything, but perhaps use something like planning for a vacation to help instill 1) the need to save for things you want or need, and 2) the fact that in the real world, money doesn't appear magically from parents or ATM machines any time you need it!

Oh... and if you and your hubby believe charitable giving and/or supporting community organizations etc is important, please be sure to teach your kids decision-making skills about that too!

 

[Maisie]

That is a very good suggestion. I would never have thought of that. We don't discuss our finances around the children, its not something we would even have thought of. I will do that. It would help them to learn how to budget for things etc.

I also wonder if its even worth trying to encourage our Autistic son to save up. He is only 7 and isn't interested in money at all (probably too young and thinks money just comes out of the hole in the wall!), although he is interested in buying toys. I wonder if we should start with a piggy bank and have him save a little bit each week for a month or so. Does that sound like a good idea?

 

[armywife13]

My parents were great about helping teach us to save. When we were 14, they told us that we needed to help save for college, so they took my brother and I to get part time jobs for on the weekend. Between 14 and 16, we were only allowed to work weekends in order to make sure we could handle school and the job without our grades suffering. Then from 16 on we could work during the week after school. Summers we were allowed to work whenever. The rule was that we were allowed to keep 10-20% of our checks for fun money and the rest went into savings. By the end of high school my brother and I each had about $10,000 saved.

Also, my parents taught us to save for items we wanted. They would buy our school supplies, new clothes each year, and other essentials. But if we wanted video games, mp3 players, or other things like that, we needed to save for that using the 10-20% of our check we kept. It taught us to really look at what we were buying and see if it was worth using all of our fun money.

 

[Haven]

I'm really good with money because my parents taught me what NOT to do, and I was terrified of putting myself in their financial situation! So, even if you're bad with money that doesn't mean your kids will be.

They did discuss finances with us, though, and I think that was a good thing. I knew that the only reason I was able to go to sleepover camp every summer was because my mom taught religious school on Sundays and the synagogue gave me a scholarship. When I entered high school I had to pay for all of my athletic fees, which weren't cheap! I saved up every summer to be able to cover those. Little bits of knowledge like that made me appreciate things more, I think.

I started working at age 11 with a regular Saturday night babysitting job, and then starting at 15 I worked retail 20 hours/week. Once I started working the allowance stopped, and that was a learning experience, too. I cared a lot more about how I spent my money once it was really MY money.

 

[Maisie]

My parents were great about helping teach us to save. When we were 14, they told us that we needed to help save for college, so they took my brother and I to get part time jobs for on the weekend. Between 14 and 16, we were only allowed to work weekends in order to make sure we could handle school and the job without our grades suffering. Then from 16 on we could work during the week after school. Summers we were allowed to work whenever. The rule was that we were allowed to keep 10-20% of our checks for fun money and the rest went into savings. By the end of high school my brother and I each had about $10,000 saved.

Wow! Thats a lot of money for you to have saved yourselves. Well done!

Our children can't get jobs. There aren't jobs around for young people here. They do earn half their pocket money by doing chores though. My son cleans the toilets and bathroom for me as I hate doing that, and my daughter walks the dog every day. They also help with other things round the house. If they opt out of the chores they only get half their pocket money. Neither of them want to stop earning their money so far

 

[Maisie]

I'm really good with money because my parents taught me what NOT to do, and I was terrified of putting myself in their financial situation! So, even if you're bad with money that doesn't mean your kids will be.

They did discuss finances with us, though, and I think that was a good thing. I knew that the only reason I was able to go to sleepover camp every summer was because my mom taught religious school on Sundays and the synagogue gave me a scholarship. When I entered high school I had to pay for all of my athletic fees, which weren't cheap! I saved up every summer to be able to cover those. Little bits of knowledge like that made me appreciate things more, I think.

I started working at age 11 with a regular Saturday night babysitting job, and then starting at 15 I worked retail 20 hours/week. Once I started working the allowance stopped, and that was a learning experience, too. I cared a lot more about how I spent my money once it was really MY money.

Hehe, i'm not bad with money now but I was in my past. I was terrible!

I think I need to get my kids to respect money at this age. If I leave it too long they might just go mad like I did. Because we didn't have money when I was growing up, I didn't learn how to look after it, or budget properly....which meant I would spend spend spend whenever I did get money. Not good and not how I want my children to be!

 

[iLander]

I lead by example, by being a terrible tightwad.

When we grocery shop, I am all about "how much is that per ounce?" and "it's probably cheaper at Costco".

My teenage DD picked this up, and will proudly proclaim "I've got a coupon!" She won't buy anything at full price, and will wait for sales on jeans (seriously, $120 jeans?) or whatever she wants.

My DS, though, takes after my DH, and he just picks up whatever is on the shelf. I wonder if his new wife has to say what I say to DH: "Did you know these pistachios are EIGHT DOLLARS?!!" We were at the grocery store this past weekend, and DH put a bag of grapes in the cart. As we were checking out, they rang up at SEVEN DOLLARS! For grapes! Not a big bag! I have no pride, and left the checkout line, hunted him down and asked if he really wanted to spend $7 on grapes. He looked surprised, and said no way. Back they went. He never checks a price.

But once it's their own money, and it's in limited supply, you'd be surprised what they can "do without". When shopping with DD, she'll say "I like this shirt" (which she REALLY doesn't need, judging by the giant laundry pile in her room) and I'll say "You have money", and she'll look at it, say "Meh" and put it back. They learn fast.

 

[sillyberry]

First - not a parent!

A friend of mine wrote a finance book for kids when he was 11. He became a minor celebrity (as precocious kids often do). As I understand it, it's really good at laying out more than just the basics for older kids at a kid-friendly level. Not suggesting you buy it -- try the library!

The New Totally Awesome Money Book for Kids

Otherwise, I know a lot of people have success with using the "save - spend - give" model to teach kids the three pillars of money management. If you google that term you get a ton of hits.

 

[Snicklefritz]

No kids either, but I learned to save money when I was around 11 years old and have been saving for a rainy day ever since. When I was 11, I fell in love with an amazingly beautiful Little Mermaid snowglobe from a catalog. It was the epitomy of everything in the world, and I had to have it. Problem was it was $55, which seemed so far out of reach! At the time (which was approximately 17 yrs ago), my parents gave me $8 a week. They told me that if I wanted it, I had to save up and they would pay shipping. And boy did I learn to save I also raked leaves until there were no leaves left to rake, cleaned the house, and did as many extra jobs as I could until I had that $55. Then I got the snowglobe!!!

I've had savings ever since. Gotta be ready when another "snowglobe" comes along

 

[Maisie]

I lead by example, by being a terrible tightwad.

When we grocery shop, I am all about "how much is that per ounce?" and "it's probably cheaper at Costco".

My teenage DD picked this up, and will proudly proclaim "I've got a coupon!" She won't buy anything at full price, and will wait for sales on jeans (seriously, $120 jeans?) or whatever she wants.

My DS, though, takes after my DH, and he just picks up whatever is on the shelf. I wonder if his new wife has to say what I say to DH: "Did you know these pistachios are EIGHT DOLLARS?!!" We were at the grocery store this past weekend, and DH put a bag of grapes in the cart. As we were checking out, they rang up at SEVEN DOLLARS! For grapes! Not a big bag! I have no pride, and left the checkout line, hunted him down and asked if he really wanted to spend $7 on grapes. He looked surprised, and said no way. Back they went. He never checks a price.

But once it's their own money, and it's in limited supply, you'd be surprised what they can "do without". When shopping with DD, she'll say "I like this shirt" (which she REALLY doesn't need, judging by the giant laundry pile in her room) and I'll say "You have money", and she'll look at it, say "Meh" and put it back. They learn fast.

I am the resident 'tightwad' in hour house!

The amount of times someone (isn't it awful when you have to take the kids shopping with you!) will put something in the trolley and they have no idea how much it costs. I just go along replacing it back on the shelf!

My husband is terrible for buying coke. I keep telling him its bad for him and it will rot his teeth but secretly i'm just too much of a miser to buy the brand when I can get it cheaper if I buy the stores own. Who cares if it tastes horrible? Its cheaper!!

Its funny you say that about your daughter realising she doesn't really need something when its coming out of her money.... I have that a LOT from my 13 year old!

 

[Maisie]

Sillyberry, that book sounds great! I don't think we can get that in our library (i'm in the UK) but I will see if I can get hold of it somehow.

Snicklefritz, your story was adorable! I'm very impressed that you saved up such a lot of money to get what your heart dreamed of! And you are ready for your next snowglobe? Thats awesome... I wonder if its doing to be diamond shaped!

 

[rubybeth]

Not a parent, either, but understanding money is so important, I'm glad you're trying to teach your kids about it.

Honestly, I think making them work for their pocket money is one of the best things you can do. Work = money, and that's that. No work? No money.

I had a friend whose parents made her save 50% of all the money she earned or got as gifts growing up until college, and she had quite a hefty sum when she got to university. Apparently, it also helped with the down payment on her and her DH's house. Explaining the power of compound interest would be good, and having them aim for a 'goal' like saving for Christmas gifts or a larger, more expensive toy would be good, but I think enforcing some discipline to actually save up and keep saving without blowing it all at once is the way to go.

Have you heard about Dave Ramsey? I have read a few of his books and, while I don't agree with everything he says, find his no-nonsense style to be simple to understand and easy to implement. He has stuff for kids and teens, too: http://www.daveramsey.com/store/kids-teens/cYOUTH-p1.html I am sure there are other products/books out there that are similar.

 

[Pandora II]

I think it can be just down to the child's nature.

My MIL showed me a diary that my husband kept on holiday when he was 6. He was given £5 pocket money for the week and at the end of each day he has a list of how much he had left from the day before, what he had bought and what he had left!

He is still like that - he probably knows down to the last penny how much is in any bank account or saving plan he has. I have never met anyone who can save as well as him!

I have a huge fear of being in debt, and while I actually don't like looking at my bank account (still makes me feel sick even though the last time I was in the red was in 1997) I'm good at living within my means.

I was brought up to buy quality that lasts and to bargain hunt and I daresay that will rub off on my daughter.

She seems to be rather interested in money - small change goes walkabout in this house and tends to be in one of her several very full purses - so I'm hoping she takes after her father. In any case I plan to leave it to him to discuss finances... he's the one with the economics degree!

 

[MichelleCarmen]

I think it can be just down to the child's nature.
!

Yeah, I agree somewhat with Pandora...it can be the child's nature. My kids are totally opposite. My younger will blow every cent of his spending money, whereas my older son will hold onto his money for a few weeks before deciding what to buy. (say this is gift money.)

I'm not the best at showing my kids how to manage money, but like iLander, I focus on the prices of things and have tried to make sure my kids look for items when they're on sale. They still don't get the cost of living and how much it costs to run a household. I think that it's not exactly right for kids to know how much their parents make per month, but they should at least learn to understand the basics like how much a power or phone bill is, which to them, are basically invisible expenses until they see the paper. They don't comprehend that to have our TV working or computer on costs money. I think they need to know these facts just as much as they need to know when it's okay to buy a toy they've been wanting. They won't ever survive in the real world unless they understand this.

 

[vc10um]

Maisie, this website popped up on my Pinterest just now, and I thought of you...hope it helps! http://moneyasyougrow.org/

 

[Maisie]

So the general consensus is that children should be taught how much things cost in the adult world, how to budget for things they want and that saving is a very good thing.

I think our first step is to open their savings accounts. Is it a good idea for us to put money into their accounts also, or just let them save? Maybe we should open separate accounts and save long term for them without them being able to access it till they are adults....

 

[Maisie]

Maisie, this website popped up on my Pinterest just now, and I thought of you...hope it helps! http://moneyasyougrow.org/

Thank you!

 

[VRBeauty]

I think our first step is to open their savings accounts. Is it a good idea for us to put money into their accounts also, or just let them save? Maybe we should open separate accounts and save long term for them without them being able to access it till they are adults....

Be careful where you open those accounts! Many banks now charge fees for small accounts that could significantly eat into your kids' savings!

 

[Pandora II]

Maisie, find an independent financial advisor (they are free) and ask them about ISAs for your kids - it's what the government child trust fund is now.

As DD has so many relatives, a number of them put money into her ISA every year in lieu of gifts. However there is no way she gets the money till she's responsible enough to spend it wisely - pay her university fees or deposit on a house for example.

 

[rosetta]

Definitely go for the child ISA.

I'm a big fan of ISAs. I max mine out on the very day the new financial year starts!

 

[Octavia]

So the general consensus is that children should be taught how much things cost in the adult world, how to budget for things they want and that saving is a very good thing.

I think our first step is to open their savings accounts. Is it a good idea for us to put money into their accounts also, or just let them save? Maybe we should open separate accounts and save long term for them without them being able to access it till they are adults....

Maisie, maybe you could set up a sort of "matching funds" program -- for example, once the child has saved £50 in the savings account, you will then deposit another £5 or 10 or whatever you feel is fair/affordable. Then another match at £100, 250, etc. it gives an incentive to save in order to get those matches, and you could always set up a rule about what will happen if they withdraw too much of the money (like they won't get matching funds again until they've saved back up to the original amount or something like that).

 

[Maisie]

Vrbeauty, I will be sure to check that. Thank you.

Pandora, I just remembered that James has about £1000 in the govt trust fund account that was set up for him. I should see what I can do to transfer or add to that. I'm glad you mentioned it.

Rosetta, I didn't realise children can have an ISA. I have one and I thought they were only for adults. I'm going to look into that too!

 

[Maisie]

So the general consensus is that children should be taught how much things cost in the adult world, how to budget for things they want and that saving is a very good thing.

I think our first step is to open their savings accounts. Is it a good idea for us to put money into their accounts also, or just let them save? Maybe we should open separate accounts and save long term for them without them being able to access it till they are adults....

Maisie, maybe you could set up a sort of "matching funds" program -- for example, once the child has saved £50 in the savings account, you will then deposit another £5 or 10 or whatever you feel is fair/affordable. Then another match at £100, 250, etc. it gives an incentive to save in order to get those matches, and you could always set up a rule about what will happen if they withdraw too much of the money (like they won't get matching funds again until they've saved back up to the original amount or something like that).

Thats a very good idea. I would definitely be happy to do that.

 

[Enerchi]

What I did when my kids were all at home and I did the online banking for all of them, each payday I would divide whatever their cheque was, into 3 components.
1 - you can spend
2 - goes to savings - you don't know now what you will NEED desperately later, or car insurance when you drive, or a new guitar, etc.
3 - into an RESP (registered Educational Savings Plan)

I made a unilateral decision that this was how it would be done (not quite so popular with the kids at the time) but when it came to paying for something big, and they had the money available in their savings... gee... who's laughing now, eh???

No idea what son's 1 & 2 do now, but I'm still able to manage DD's money for her (I tell her each pay day what she made and what she can spend and what I put into savings for her) and she's quite content with the system as it stands.

 

[Jennifer W]

Maisie, find an independent financial advisor (they are free) and ask them about ISAs for your kids - it's what the government child trust fund is now.

As DD has so many relatives, a number of them put money into her ISA every year in lieu of gifts. However there is no way she gets the money till she's responsible enough to spend it wisely - pay her university fees or deposit on a house for example.

Pandora, I'm sure you've looked into this and know the details, but the Child Trust Funds are accessible to the child only (and I think it's at a really young age, possibly 16). If you pay additional money into that, it is essentially a motorcycle / unsuitable tattoo fund. Long term savings accounts are in my name not the kid's, for that reason - I'm a control freak.

My father was always banging on about saving / managing money, looking for bargains, shopping while looking at prices etc. As an adult, it gives me more pleasure than I can describe to do pretty much the opposite at every opportunity. I didn't benefit from any of his teaching because they went against my nature. I can show my kid the basics if she's interested, but otherwise she can figure out what works for her. I can tell her what I think she ought to do, but it's down to her in the long run.

The only strong message I have to pass on to my child about money is that I believe you must invest it and indeed spend it ethically, taking the time to find out, and that you must never have debt. I don't use credit, and I can tell her all the good and sound reasons why. Of course, as an adult, she may decide to do the opposite. Who knows?

 

[Maisie]

What I did when my kids were all at home and I did the online banking for all of them, each payday I would divide whatever their cheque was, into 3 components.
1 - you can spend
2 - goes to savings - you don't know now what you will NEED desperately later, or car insurance when you drive, or a new guitar, etc.
3 - into an RESP (registered Educational Savings Plan)

I made a unilateral decision that this was how it would be done (not quite so popular with the kids at the time) but when it came to paying for something big, and they had the money available in their savings... gee... who's laughing now, eh???

No idea what son's 1 & 2 do now, but I'm still able to manage DD's money for her (I tell her each pay day what she made and what she can spend and what I put into savings for her) and she's quite content with the system as it stands.

You are very organised! I think thats part of my problem with money. I am a disorganised person in general. I am a lot better now but when I was in my early 20's I was absolutely useless with money. Its been a long road to where I am now.

 

[Maisie]

Maisie, find an independent financial advisor (they are free) and ask them about ISAs for your kids - it's what the government child trust fund is now.

As DD has so many relatives, a number of them put money into her ISA every year in lieu of gifts. However there is no way she gets the money till she's responsible enough to spend it wisely - pay her university fees or deposit on a house for example.

Pandora, I'm sure you've looked into this and know the details, but the Child Trust Funds are accessible to the child only (and I think it's at a really young age, possibly 16). If you pay additional money into that, it is essentially a motorcycle / unsuitable tattoo fund. Long term savings accounts are in my name not the kid's, for that reason - I'm a control freak.

My father was always banging on about saving / managing money, looking for bargains, shopping while looking at prices etc. As an adult, it gives me more pleasure than I can describe to do pretty much the opposite at every opportunity. I didn't benefit from any of his teaching because they went against my nature. I can show my kid the basics if she's interested, but otherwise she can figure out what works for her. I can tell her what I think she ought to do, but it's down to her in the long run.

The only strong message I have to pass on to my child about money is that I believe you must invest it and indeed spend it ethically, taking the time to find out, and that you must never have debt. I don't use credit, and I can tell her all the good and sound reasons why. Of course, as an adult, she may decide to do the opposite. Who knows?

I'm a little bit worried about James with savings. I wonder if there are different rules if you are looking after someone with a disability. Saying that, my brother has quite serious special needs and he once went out and spent £2000 on gadgets for his house, half of which he never used because he didn't understand how to. I think his carers have a lot more input into his spending habits now. Perhaps I should have a savings account in my name that James' money goes into or some kind of joint account. That way he can't go on a spree when he is bigger. Well, not without me there anyway!

 

[Enerchi]

Thanks Maisie, for thinking I'm organized! I'm pretty much like that with my own paycheque now too - I have a certain amount I'm committed to each pay, then I put some into savings, then whatever skimpy bit is left, is either saved up for a purchase... or squandered! I can squander like nobody, if I need to!!

 

[Maisie]

Thanks Maisie, for thinking I'm organized! I'm pretty much like that with my own paycheque now too - I have a certain amount I'm committed to each pay, then I put some into savings, then whatever skimpy bit is left, is either saved up for a purchase... or squandered! I can squander like nobody, if I need to!!

Ah squandering is fun!!