Growing tomorrow's savers

When it comes to money, no one has more influence on their children than their parents. Helping them learn to save and manage money is a valuable gift that will stay with them throughout their lives. Children as young as three can understand money can be traded for goods and services. But, are parents proactively helping their children learn how to handle money? And, where money comes from?

  • 75% of adults say their parents gave them money or an allowance, and discussed the importance of saving and spending wisely.
  • And, although 85% of parents think allowances are a good idea, only 40% of children under 18 get an allowance.
  • Of children who do get an allowance, the median is $4 per week.

Lesson one: Planning and managing

A weekly allowance allows children to understand the value and scarcity of money, and mimics receiving a paycheck. And like a paycheck, you can require the child to complete a set of chores in exchange for the allowance, or you can treat it like a trust fund, where the allowance is awarded for being a member of the family. 

If the allowance is in exchange for work done around the home, write these down and post them in the house as a reminder. And despite the urge to do so, experts recommend not withholding an allowance for poor grades or as a disciplinary tool. Doing so violates your agreement and defeats the purpose of building trust and routines around money.

How much should the allowance be? You can start with $1 for each year of your child’s age.

Who pays for what?

Have a talk with your kids about what expenses they are expected to pay for. You might ask them to pay 20% to 100% for games, but not school supplies. Setting clear rules up front, in writing, helps avoid surprises. 

Who makes the purchase?

Let your children learn how to shop and pay for things at the store. Show them how to read the price tag on the shelf and determine if they have enough money to buy it. If they do, let them pay for the item at the register using cash. They’ll get the chance to see how this exchange works and, if using cash, help them count any change received to make sure it’s the correct amount.

“I encourage parents to bring their children in to make deposits in person, so they learn first-hand how their accounts work."
Elesja Callaghan, Marin County CU President/CEO

When should savings begin? 

Most of us wish we had started saving earlier. Wouldn’t it be great for your children to learn this lesson now? Encourage your young saver to set aside 25% and use the rest as they please. To encourage them to save more and understand deferred gratification, consider a “match” of their weekly savings. 

Should they have their own savings account?

Kids like having things of their own and that includes their own savings account. Bring them in to the Credit Union to open their account and to make deposits.

 “I’ve seen first-hand how proud children are when opening an account,” Elesja Callaghan, Marin County CU President/CEO said. “I encourage parents to bring their children in to make deposits in person, so they learn first-hand how their accounts work.” 

Although it’s easy to put money on a card for your children, Callaghan says doing so means they won’t truly learn the value of money. “If they don’t actually touch the money, it’s hard for them to grasp that it is worth something.” She also encourages parents to give their children a clear coin bank or something like it, to watch their savings grow at home before they deposit it.

Head to the library

Taking children to the library not only helps them appreciate books and reading, but is also a budgeting lesson — why pay for something you can rent for free? Ask the librarians at Marin County Free Library for great recommendations for books about money written for children. Here’s a great list you can start with.

There are as many ways to teach financial education as there are children. Choose ideas that work for your family and then be consistent with them. Repeated experiences learning about and using money help children develop strong financial skills they’ll use for a lifetime.

We offer a free Kirby Kangaroo Savings Club for all kids in Marin County and we even deposit the first $5 in it. Call us at (888) 521-0135 or learn more here.