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Dollars and Sense - February 2024

How Early is Too Early to Start? Teaching Our Children to Save Money

“It’s never too early to teach your children about the tool of money. Teach them how to work for it and they learn pride and self-respect. Teach them how to save it and they learn security and self-worth. Teach them how to be generous with it and they learn love.” Judith Jamison, American Dancer and Artistic Director

Children pick up money habits quickly. A study from the University of Cambridge found that children will form habits regarding money by age seven (first and second grades). It is imperative that good financial habits be modeled by parents early on. 

Needs vs. Wants

One of the first things to teach is that there are wants and needs. Basic needs like food and shelter are very different from a new toy or ice cream cone. The line between wants and needs is different for each family, but there should be a level of explanation that helps the child understand early on that they will not receive everything that they want. They will hopefully, however, be given what they need.

Importance of Responsibility

It is important to allow children to earn their money as early as possible. There are plenty of opportunities for children to help around the house as a way to keep busy, out of trouble, and, most importantly, recognize that their help makes a difference. Contributing in this way will also teach them the value of hard work.

Three Jars

When children are earning money, it is important to start off with the basics. There should be a way for them to physically separate the money into three parts. This method allows them to put some aside to spend on themselves, the future, and for charity. Use any containers such as jars, buckets or envelopes that will keep the money separate. As the children grow older, bank accounts can be used to make the split more practical. Be careful to choose a bank account that charges no fees and no minimum balances.

Set Goals

If you tell your child to save and provide no goal setting, the actions may not resonate with them. Take some time to talk about why they are saving money. It will be easiest to teach with money that they save to spend on themselves. If you can identify that bike accessory or special treat that a child really wants but does not need, it will make much more sense to save money. 

Track Earnings

As your children begin to spend the money they have earned, provide them with a way to track where the money has gone, including the savings and charitable donations. As they get started, just a simple written list will be helpful. Keep the list with the money but refer to it often, so they always know where their money is being spent.

Encourage Savings

Many people take advantage of matching contributions in their retirement plans at work, which is a great incentive to save even more money. The more you save, the more companies match. Company matching is only for the first few percent of salaries in most cases, but you can use the same incentive for our children. Let them know that if they save a certain amount, you will add a certain match to their savings to help them put more away.

Talk About It

The best way to help your children learn to spend is to set a good example for them. If you save and incorporate it into the discussion occasionally, they will often mirror the behavior. Conversations about seminary, yeshiva and/or college savings, investments, and even retirement savings can have an impact on the children. Talking with your children about goals for your savings will help them know you are doing the same thing as you are telling them.  When the family is able to go on vacation or get a new car, it is important to note to everyone, including the children, that such a purchase is due to hard work and savings.

Parents are faced with many jobs, and one of them is to prepare children to be financially responsible. The earlier you start this plan, the easier it will be. Making savings a part of your family’s lives will allow you to raise children who will be well on their way to financial security.

Watch for upcoming blogs on ideas of how to leave a legacy of philanthropy in your families.

“Don’t save what you have left after spending but spend what is left after saving.” Warren Buffett


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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