Establishing good saving and spending habits in
your kids at an early age may not be as difficult as
you think. It will require a little due diligence on
your part but is well worth the effort in the long
run. The following tips along with a running dialog
can help you jump-start your kids onto the road to
financial security.
1. Match their savings dollar for dollar…or
quarter for dollar. What better incentive for kids
to save their money than for them to know that for
every dollar they put away, it will be matched by a
given amount. It’s kind of like “free” money. Okay,
so it may not be free for you, but you’re helping
establish the habit of saving and, in the long run,
it will have been worth the extra money you had to
put up. Matching funds can easily be set up in
the KidsSave program and payouts are automatically
deposited at the end of each month.
2. Give them interest on their savings. This is
another example of “free” money. And depending on
where the interest comes from, it may even be free
to you. Opening a savings account at a bank or
credit union will usually mean your child will
receive interest/dividends on his balance each
month. But keep in mind that this interest is
typically not a whole lot, especially for the kind
of balance a young child may have. And not many kids
get excited about seeing 12 cents deposited in their
account. So consider using KidsSave to set up your
own interest payment plan for your child’s monthly
ending balance. Ten dollars earned on a balance of
$100 (10% interest) is a lot more appealing than 10
cents earned. And you can vary the amount of
interest you give as their balance grows. Which
leads us to the next category…
3. Illustrate the power of compound interest.
Show your child what can happen to her money over
time if she saves it and is earning interest on it.
This is called compound interest, the building of an
account’s value on itself. You’ll probably have to
go out several years for her to get the full impact
of this compounding. A great way to visually
illustrate this is through the What-If section of
the KidsSave program. This is where kids can
experiment with different savings scenarios to see
what happens to their account money over
time. Kids get to see in graph form the curve that
is made through compounding interest which can be a
very enlightening experience…even for adults!
4. Give them an allowance. An allowance is a
popular way to get money into the hands of kids and
probably the most effective tool to
teach money management. You can set up automatic allowance
with the KidsSave program and choose any amount you
want to have deposited on a regular basis (daily,
weekly, bi-weekly, monthly). But once you hand
over the money, how do you keep kids from spending
it all? Consider having your child save a portion of
it; the rest is theirs to spend. Using the
savings lock option in the KidsSave program will
ensure that some of their money will always be in
their account.
5. Have your child set up a personal financial
goal. Give your child a concrete reason to save.
That really cool pool toy that he just has to
have... Use the goal setting feature in KidsSave to
help him create a plan to save the money to buy the
item himself. Maybe you could match him dollar for
dollar. But whatever you do, start simple. Make sure
the goal is easily attainable and make it happen in
a relatively short period of time. Attaining success
quickly will increase the chance he will want to set
up another goal, at which point you can increase the
time or the amount he needs to save.
And, of course, kids are notorious at watching
what you do when you’re not looking. If you
model good saving and spending habits, chances are,
your kids will probably do the same.
