Of all the things a kid (or we adults, for that matter) can do with money, saving it may be the most boring. Spending, of course, is fun. Investing and giving can be exciting as well. But saving money is all about setting it aside for some other day — some time in the future — while earning very little interest along the way. That’s a tough sell.
Don’t despair. You can turn your kids into savers by embracing three key parental roles: the gatekeeper, the teacher, and the role model. And the rewards from doing so will go far beyond whatever account balance your children are able to build.
How do you get your kids to save? Make them. That doesn’t sound very politically correct in our every-kid-gets-a-trophy age, but a wise parent once pointed out that a family is not a democracy. There are simply some things your kids must do. And yes, just because you said so. As a parent, you have the right to require your kids to save a portion of any money they receive.
You don’t have to be heavy handed about it. Just build it in as an expectation as early as possible. Get them in the savings habit by having them use three jars or piggy banks. One is for giving, one is for saving, and one is for spending.
A common framework is 10-10-80, with 10% going in the giving jar, 10% in the saving jar, and 80% for spending. Getting them in the habit of giving at least 10% of all the money they receive is appropriate. When they’re really young and perhaps receiving a very small allowance, having them save 10% is fine as well. It won’t amount to very much money — but it will establish the savings habit and that’s the point.
When they start receiving a larger allowance or earning extra money, make it the rule that a larger portion (perhaps half) goes into savings. At the same time, make them increasingly responsible for certain purchases, such as birthday gifts for their friends, non-essential clothing, etc.
Putting more and more purchasing responsibilities on our kids should help them save more diligently, teach them to make trade-offs, and may help them become smarter shoppers as well. Not long ago, our nine-year old was saving for a LEGO set that retails for more than $100. After many months of saving, he had enough money to buy it. But he then found a used version of the set being offered for less, negotiated an even lower price, and was happy to have money left over.
Whenever your kids receive money as a gift — perhaps for their birthday or Christmas — make sure half or more goes in the bank for long-term savings’ goals, such as college.
As you read Scripture with your kids, be sure to include the Parable of the Talents (Matthew 25:14-30) and Proverbs 21:20. Help them understand that everything we have is a gift from God. Yes, we work hard to earn money, but it’s God who gives us the ability to earn (Deuteronomy 8:17-18). Since God is the owner, we’re stewards or managers of His resources, and an important part of His managerial instructions is to maintain a reserve.
Find a local bank or credit union that offers kids’ savings accounts with very low or no minimum balance requirements. Take your kids with you whenever they have money to deposit. Having them deposit actual dollars and cents will make the act of saving money very real.
Another helpful way to teach and motivate kids to save is to have them set specific goals and put a picture of what they’re saving for near their saving jar.
The role model
As is true with all lessons we’re trying to teach our kids, more will be caught than taught. So, be sure to be a saver yourself.
I recommend maintaining three types of savings, and discussing each one with your kids. The first is an emergency fund. Tell your kids that we should all expect the unexpected. One of the most significant financial emergencies would be the loss of a job. Explain that you keep enough money to cover the family’s essential living expenses for a certain number of months (preferably at least six) to protect against that possibility. A financial emergency for them might be the loss of an expensive electronic device.
A second type of savings is for the replacement of big-ticket items. Explain that vehicles don’t last forever and it’s far better to buy vehicles with cash than to finance them, so you’re (hopefully) saving to buy your next vehicle with cash. Point out other expensive items that will need to be replaced at some point — the roof on your house, the furnace and air conditioner, appliances, etc. — and that it’s wise to set aside money in savings for such things. For your kids, a bike that’s now too small may need to be replaced and their savings can help pay for the next one.
The third type of savings is for the periodic bills and expenses you have to pay at some point each year but not necessarily every month. Examples include an annual life insurance premium, a semi-annual vehicle insurance premium, vacations, Christmas gifts, and more. It’s wise to have one-twelfth of the annual cost of all such items on your monthly budget and to transfer that amount into a dedicated savings account each month. That way, when the bill or expense needs to be paid, money will have been building up for that purpose. For your kids, it would be helpful if they set aside a little money on a regular basis for Christmas gifts they want to buy or for items they might want to buy on your next vacation.
Remember what it’s all about
By teaching our kids to save, we’re teaching them an important aspect of good stewardship. We’re also helping them cultivate one of the most important character traits for a life lived well: delayed gratification.
You may have heard about a delayed gratification research study conducted in the 1960s at Stanford University. One at a time, four-year-olds were brought into a room with a researcher where they were given their choice of treats. They were then told the researcher had to run an errand and while they waited they could eat one treat right away, or, if they could wait until the researcher returned, they could have two. Only 30% of the kids could wait the full 15 minutes until the researcher returned.
Years later, when the kids were in high school, the researchers checked up on them and what they discovered was remarkable. The kids who could wait for a better reward when they were preschoolers were experiencing fewer behavioral problems, having an easier time maintaining friendships, and scored an average 210 points higher on their SATs than the kids who couldn’t wait. No wonder psychologists consider delayed gratification one of the master principles for effective living.
It’s also a foundational aspect of living a life of faith. As Christ-followers, we’re taught that the greatest healthy experiences of this world are but a small foretaste of what’s to come in heaven. As John Eldredge put it, it’s honoring to God when we “enjoy what there is now to enjoy, while waiting with eager anticipation for the feast to come.” In other words, living with heaven in view is the ultimate expression of delayed gratification.
See those piggy banks sitting on your kids’ dresser? They’re teaching your kids some important lessons about wise money management — and so much more.
In addition to his work as SMI’s managing editor, Matt leads workshops at churches on how to teach kids about money and other financial topics. If you have a young person in your life in their mid- to late teens, consider buying him or her a copy of Matt’s book, The Grad’s Guide to Money.