How to Teach Your Kids About Saving Money?

Saving money is one of the most important aspects of building wealth and having a secure financial foundation.  

Yet many of us have learned the importance of saving money through trial and error, and more importantly, experience.

In school, we aren’t really taught about the importance of saving and many of us find that as adults, we have to fend for ourselves.

As a parent, you want the best for your children. This doesn’t necessarily mean you want them to have the best clothes, the latest toys or coolest gadgets. 

Most likely, it means you want them to be safe and secure. And you want to lay a foundation that they can build upon to do well in life.

The question, then, is whether you’re teaching your children a key lesson that will impact whether they will do well. That lesson is about money.

There are ways to empower the next generation, and that starts by teaching children the importance of saving from a young age. If you are a parent, here are some ways to teach your children about saving money.

Discuss Wants Vs. Needs

The first step in teaching kids the value of saving is to help them distinguish between wants and needs. 

Explain that needs include the basics, such as food, shelter, basic clothing, healthcare, and education. 

Wants are all the extras—from movie tickets and candy to designer sneakers, a bicycle, or the latest smartphone. 

You can use your own budget as an example to illustrate how wants must take a back seat to needs in terms of spending. 

Start With a Piggy Bank

A piggy bank can be a great way to teach your kids the importance of saving, while giving them an easy way to do it.  

Tell your kids that the goal is to fill up the piggy bank with dollars and coins, until there is no room.  

Illustrate that the piggy bank is for saving money for the future and that the more they save, the more their money will grow.

Let Them Earn Their Own Money

Two-thirds of parents said they paid their children an allowance in 2019, according to a survey by the American Institute of Certified Public Accountants (AICPA), with kids earning $30 per week on average, based on five hours of chores.

If you want your children to become savers, allowing them to earn and save money provides them with the opportunity to learn how to use it. 

When you offer allowances in exchange for chores, they’re also learning the value of their hard work.

Set Savings Goals

To a kid, being told to save—without explaining why—may seem pointless. Helping children define a savings goal can be a better way to get them motivated. 

If they know what it is they want to save for, help them break down their goals into manageable bites. 

If they want to buy a $50 video game, for example, and they get a $10 allowance each week, help them figure out how long it will take to reach that goal, based on their savings rate. 

Open up a Bank Account

Once the piggy bank is full, take your child to the bank to open up a savings account for them.  

Have them count how much money is going to be deposited, so they can have a physical understanding of how much money they have.  

Show them the final number and reinforce the idea of interest.

It can provide a great source of motivation for your kids if they understand that their money will grow over time as long as they don’t touch it.

Use Savings Jars

When your kids really want the latest and greatest toy or a new action figure, let them know they will have to save up for it.  

Give them a jar for each of their desired purchases and offer them a small allowance each week in a denomination that encourages savings.

For example, if you give your child five dollars a week, give it to them in one dollar bills.  

They can save all their cash for one purchase, or they can contribute to different “jars” for various savings goals.

To encourage saving up for their short-term goals, put a picture of their desired toy or item on the jar, so they have a visual reminder of what they are working towards.

Create a Timeline

As a kid, the concepts of money and time can be hard to grasp. Research has shown that the impact of a one hour financial lesson wears off after about five months. 

In order to make the message stick, money education should be timely and ongoing.  

If you know your child receives a $50 check for their birthday each year, the moment to talk about budgeting is right before receiving that check.

One way to keep money lessons ongoing is to create a timeline so that your child can visualize when they will reach their goal.

Let’s say you give them five dollars a week and they want to save up fifty dollars.  

If they saved one hundred percent of their allowance, they’d reach their goal in ten weeks, or roughly three months.

Start by getting a long piece of paper and a marker.  Have $0 on one side and $50 (or whatever goal amount) on the other side.  

Create checkpoints on the paper for when they reach 25%, 50% and 75% of their goal.

Every time an amount is saved, draw a line illustrating how much was saved.  Let your kids know that they will get small rewards at each checkpoint. 

Small rewards can encourage kids to keep going.  Visuals are also helpful in illustrating their savings goals and how their money is growing.

Instill a Habit of Saving

Your kids’ early interactions with money will likely involve spending. They see you using it to purchase things, including things for them. 

So it’s important to teach them from a young age that money isn’t just for spending—they should be saving money regularly, too.

Learning to save isn’t just an essential money habit. Saving teaches discipline and delayed gratification. 

Saving teaches goal-setting and planning. Saving stresses being prepared. Saving builds security and independence.

Help your kids get in the habit of saving by giving them a piggy bank or savings jar where they can deposit coins or cash. 

Then use short, simple messages to encourage your kids. Here are some examples:

• Saving is a great habit.
• I love to save.
• It feels good to save money and build my future.

With young kids, though, you’ll likely have more luck teaching them to save for short-term goals—such as a toy they really want—rather than for the future.

Encouraging his kids to set short-term goals when they were little helped them learn the value of delayed gratification.

As they have gotten older, they are now able to save for longer-term goals.

Parents also can encourage their kids to save more by agreeing to match the amount they save dollar for dollar or by a certain percentage. 

If your children are old enough to advance from a piggy bank to a real bank, you could take advantage of a service 

These prepaid debit cards and apps allow parents to transfer money to their kids and pay them interest—at a rate of their choosing—on any of the money the kids choose to stash in savings.

Create Opportunities to Earn Money

Kids need to have money of their own so they can learn how to make decisions about using it. An allowance can accomplish that.

However, you should consider requiring your kids to do certain chores to earn their allowance. 

Just about everyone values money they earn differently than money they receive.

There are some chores the kids have to do without pay because they’re expected to help out as part of a family. But if they want to get paid, they have to complete certain tasks.

Help Kids Learn to Make Smart Spending Decisions

In addition to wanting his kids to understand that money is earned

Track how much they have coming in and going out and how much they’re saving. Learning how to budget now will help them when they enter the real world.

Teach your kids that spending isn’t always about buying things you want. Let them learn that they will have to spend money on things they need when they’re adults and can make the choice to pay people to do things for them. 

So if your kids don’t do certain things they’re expected to do to help out around the house, it will cost them.

In essence, they’re paying their parents to do those things for them. And the money comes out of their allowance. 

Provide a Place to Save

When your children have a savings goal in mind, they’ll need a place to stash their cash. 

For younger kids, this may be a piggy bank, but if they’re a little older, you may want to set them up with their own checking or savings account at a bank. 

That way they can see how their savings are adding up and how much progress they’re making toward their goal.

Have Them Track Spending

Part of being a better saver means knowing where your money is going. 

If your children get an allowance, having them write down their purchases each day and add them up at the end of the week can be an eye-opening experience. 

Encourage them to think about how they’re spending and how much faster they could reach their savings goal if they were to change their spending patterns.

Offer Savings Incentives

One of the reasons people save in their employer’s retirement plan is the company's matching contribution. 

After all, who doesn’t like free money? If you’re having trouble motivating your kids to save, you can use that same principle to ramp up their efforts. 

If your child has set a big savings goal—for example, a $400 tablet—you could offer to match a percentage of what they have saved. 

As an alternative, you could offer a reward when your kid reaches a savings milestone, such as a $50 bonus for hitting the halfway mark.

Leave Room for Mistakes

Part of putting kids in control of their own money is letting them learn from their errors. 

It’s tempting to step in and steer kids away from a potentially costly mistake, but it may be better to use that mistake as a teachable moment.

That way they’ll know in the future what not to do with their cash.

Act as Their Creditor

One of the basic tenets of saving is to not live beyond your means. If your child has something they want to buy and feels impatient about saving for it, becoming your kid’s creditor can help to teach a valuable lesson about saving. 

Say your child wants to purchase something that costs $100. You could “lend” the money and require payment from the allowance you provide, with interest. 

The lesson you want to teach is that saving may mean delaying gratification longer, but the item you want to buy will end up costing less if you wait.

Lead by Example

Children learn by example, so the best way to teach your child about saving money is to save money yourself.  

Have your own jar of money that you put funds in regularly.  When you’re out shopping, show your children how to discern between various prices and explain why buying one item makes better sense than another.

Reiterate the message that every time you get paid, you save a portion of your check to help prepare for the future.

Teach your kids about why and how you are saving for their college education. 

Talk About Money

If you want kids to learn about saving, it must be an ongoing discussion. Whether you schedule a regular weekly check-in to talk about money or make money chats part of your daily round, the key is to keep the conversation going. 

One of the most important things you can do is to start a conversation about money and the importance of saving. 

Money doesn’t have to be scary or a taboo.  Use financial discussions as teachable moments. 

An innocent question such as “Are we rich?” can be answered in a way that emphasizes family values, such as hard work and responsible spending.

Let your children know they can have an allowance, but it’s up to them to save up for things they really want. 

In addition, illustrate how much their money can grow over time if they save.

Also discuss the difference between needs and wants and tell your children you are always open to talking about money and new ways to save.  

Ask them about what they want to save up for.  Ask them what they want their future to look like.

Asking good questions can get them to think long-term and have a positive relationship with money.  

Letting them know you’re always open to having a conversation about money can encourage them to ask questions of their own to keep learning.

Teaching kids how to save money may seem like a tough task.  It has even been said that parents are more likely to talk to their children about sex than about money.  

But using these tips, you can make your child’s understanding of money fun and accessible.  It’s an investment in knowledge which truly pays the best interest.

Teach Kids How Their Money Can Grow

Saving money is a great habit. But if you want your kids to learn how to truly build wealth, teach them about investing.

If you don’t understand investing well, you could give your kids a book that explains how it works.

Model Good Financial Behavior

Just as important as the lessons you teach your kids about money are the ways you discuss and handle money when you’re around them. 

For example, if you complain about having to spend too much on certain things and then take your kids on a shopping spree, you’re sending mixed messages.

Instead, make sure you model the behaviors around money that you want your children to adopt. 

If you want your children to develop good spending and saving habits, they need to see you making smart spending and saving choices. 

In short, practice what you preach. And preach with consistency. Educating your children about personal finance is a process that can take time. 

But if you put in the effort and continuously communicate a clear message about money, you will instill good habits that will serve your children well.

The Bottom Line

Saving money is a habit that parents can teach their children at a young age.

The first step is to explain important concepts such as savings, a budget, and goals—then keep the conversation going.

Giving children an allowance can teach them the value of money and—if chores are involved—hard work.

Younger children might keep their savings in a piggy bank, but older ones might want to keep their money in a real bank while working on their goals.

Children can learn the importance of living within their means, which is one of the basic tenets of saving