Teaching your child to save money is one of the most important pieces of wisdom you can give them. By helping them develop good financial habits early on, you set them up for financial stability and independence throughout their life. Whether they’re saving for college, their first car, or just to build good habits, here’s how you can help your child develop savings smarts.

1. Start with the basics of money management

Before your child can start saving, they need to understand the basics of money management. Teaching them the difference between needs and wants is a good place to start. Explain how money is earned, spent, and saved, and why it’s important to live within their means. Use age-appropriate language and examples to make these concepts relatable.

Tip: Use visuals like jars or piggy banks labeled ‘spend’ and ‘save’ to help younger children grasp the concept of budgeting.

2. Open a savings account for them

One of the best ways to teach your child about saving is to open a savings account in their name. Most banks have special accounts for children that have low minimum balances and no fees. Having their own account can make saving feel more real and give them a sense of responsibility.

Tip: Encourage your child to make a habit of depositing part of any money they get, whether it’s from allowances, birthday gifts, or part-time jobs.

3. Set savings goals together

Help your child set specific savings goals, whether it’s saving for a toy, a new pair of Jordans, or long-term goals like college. Having a goal makes saving more meaningful and gives them something to look forward to.

Tip: Break down the goal into small, manageable steps. For example, if your child wants to save $100, help them figure out how much they need to save each week or month to reach that goal within a certain amount of time.

4. Teach them the power of compound interest

As your child gets older, introduce them to the more complex concept of compound interest. Explain how the money they save can grow over time if they leave it in the bank and earn interest. Use simple examples to show how their savings can increase even more if they keep adding to it regularly.

Tip: Use an online compound interest calculator to show them how their savings could grow over time if they contribute to it regularly.

5. Encourage regular savings habits

Consistency is key when it comes to saving. Encourage your child to make regular contributions to their savings, even if it’s a small amount. This helps them develop a habit of saving and reinforces the idea that saving money is important.

Tip: Set up a system where your child can automatically transfer a portion of their allowance or earnings into their savings account.

6. Match their contributions

To motivate your child to save more, try matching their contributions. For example, if they save $10, you could add another $10 to their savings. This not only encourages them to save more, it also teaches them the benefits of disciplined saving.

Tip: You can also use a tiered matching system, where you match a higher percentage for larger contributions. This can incentivize them to save more over time.

7. Teach delayed gratification

One of the most valuable lessons in saving is learning delayed gratification. Encourage your child to wait and save up for something they really want, rather than spending their money on impulse purchases. This helps them build patience and understand the rewards of saving.

Tip: When your child wants something, suggest they wait a week or two before buying it. During this time, they may decide they don’t need it after all, or they may be more motivated to save.

8. Introduce them to investing

As your child becomes a teenager, consider introducing them to the basics of investing. Explain how investing differs from saving and how it can help their money grow over the long term. Start with simple concepts like stocks, bonds, and mutual funds, and consider setting up a custodial investment account where they can begin to invest small amounts.

Tip: Use educational resources like books or online tutorials designed for young investors to help them learn more about the stock market and other investment opportunities.

9. Lead by example

Children learn a lot by watching their parents. Set a good example by demonstrating healthy saving and spending habits for them. Talk openly about your financial decisions, and show them how you save for goals, budget your money, and make purchases mindfully.

Tip: Involve your child in family financial discussions when appropriate. This can help them understand how financial decisions are made and the importance of planning and saving.

10. Celebrate milestones

Saving money can be hard work, so it’s important to celebrate your child’s wins. When they reach a savings goal, acknowledge their achievement and discuss how proud you are of their efforts. This positive reinforcement can encourage them to continue saving and set even bigger goals.
Tip: Try giving them a small reward or letting them to spend a portion of their savings on something they’ve been wanting as a way to celebrate their accomplishment.