How to Teach Kids to Save

How do you teach your kids to save instead of spending their money as they get it? And how do you discourage your family members from spending everything they earn? I hear that a lot from parents and they’re great questions.

Teaching kids how to save up for big purchases while they’re young will prepare them for larger financial decisions they’ll have to make down the road. It teaches them to set goals and work to earn their money.

It’ll also help them to make saving and only purchasing when they have enough money to do so a habit. After all, it’s much better to do that instead of hopping on the Instant Gratitude Express at the Debt Station!

Here are a few ways you can teach your kids to save money instead of spending everything they earn.

Teaching Your Kids to Save

It’s never too early to talk to your kids about money and saving for bigger things rather than spending money as they get it. Yes, these items will grow as your kids do, but the idea of saving now so you can get more later is applicable at any age.

Basically, the conversation is the same at 5 as it is at 15. They’re saving up to purchase an item they desire, but the items change, whether it’s a toy, cell phone, or car.

In my opinion, the toughest thing nowadays is instant gratification. Not only that, thanks to the advent of 2-day shipping, kids have become accustomed to having it right here, right now.

Trust me, I completely understand wanting my kids to be happy. But there’s a difference between wanting them to be happy and giving them what they demand in order to make them happy in this moment.

This is a great way to open a conversation on expectations around A) not being able to have what they want at this very moment and B) financially preparing so they have a sum of money equal to the item they’d like to purchase (AKA: saving).

At the end of the day, talking openly about anything is the best course of action. You’ll build trust with your kids and teach them to be in a good relationship with their money and what they buy with it.

Ideas for Teaching Kids About Earning Money, Saving, and Interest

My mom has a great incentive for our kids. Since banks don’t pay much interest on the amount my kids would put in the bank, she “gives them interest” so to speak. So, if they save their birthday money, she’ll give them extra as a reward.

We also love using games as an example, especially when my kids were too young to work for their money and they were mostly getting small bills from family members at holidays and birthdays. Games that illustrate the importance of saving will help you teach your kids about financially preparing. I’m thinking of the classic, Monopoly. It has it all. Buying, negotiating, interest, debt… you name it!

Finally, my kids worked really hard on cleaning up the pool, so we went to the store to pick out pool toys. That was their incentive and payment we agreed upon before cleaning. If you don’t want to give your kids money for doing a particular task, find ways to encourage them to contribute for a reward. And, if you want some ideas of things to do this summer that don’t require spending money, this post has a handful!

What About an Allowance?

Ah, the question of giving an allowance. I like to tell my kids: They can have everything they possibly want, but they have to earn the money for it. So, as my kids have gotten older, we focus more on earning. This teaches them to set goals and diligently work for something they want.

Here’s what works for us: Doing regular chores doesn't come with a payment. My kids are learning that they have to contribute and not to just do things because it’s beneficial to them (AKA: getting an allowance).

That said, they can earn money for anything extra that they do. However, we’ve set a gateway that they have to complete before they can do anything else to earn money. That gateway is picking up dog poo. Not glamorous, but we have three dogs and no one likes that task! Quite frankly, it’s one I don’t want to do either and it needs to get done so I pay whoever does it. And they quickly learned that if it’s done every day, it’s not that much work and they know exactly how much they will save and in what timeframe. If they want to earn money so they can purchase something they’ve set as a goal for themselves, they understand they have to do what is asked of them.

And here’s a key piece of teaching kids about earning money: They have to do a good job in order to receive their allotted payment. They don’t contribute anything if they just go through the motions (especially when it comes to cleaning) so they don’t earn anything either.

Now, you may be thinking, This is all well and good, but what about my partner? They’re a spender! This post will help you talk about money with them. In particular: How to focus on financial goals and create a plan to achieve them!

At the end of the day, open conversations about earning and saving money is the way to go. Giving your kids everything they want when they want it won’t prepare them for the financial realities they’ll face when it comes time to make a big purchase later on.

Whether your kids want a cell phone or they’re starting to think about managing their money without you while they’re away at college, teach your kids to save money now so you know they’ll be set for the future.