How to teach your kids about money and saving

Over the years we've tried to teach our daughters about money and savings, trying different methods and ideas. This post brings together our views, experiences and posts over several years and what we and our kids have learned.


What is money?

When do children begin to understand the concept, value and use of money?  Paper (or plastic paper in Australia’s case) along with small metal circles that you can swap for toys and sweets is a pretty far out idea.  Equally, understanding more than the fact that mum and dad go out every day to work to get this thing called money falls into the same category.  What a crazy concept and I often question how early and how do kids internalise the use of money?

In my mind, money only becomes a concern when there is a need or want.  Today’s society is such a throw away one where kids seem to have everything.  What they see, they get and if something breaks, it seems to be ‘not to worry, we’ll just buy a new one.’  It certainly didn't used to be like that.  The days of stitching on a button or glueing together a cracked item seem long gone.  


The idea of Pocket Money

As parents with young kids, a common Saturday afternoon conversation topic with friends is the idea of pocket money.  Our girls still don’t seem to have the ‘need’ for money and don’t ‘want’ anything enough to ask for money or try to save seriously.

Pocket money needs to be something that kids have complete control over, with guidance regarding use but not orders.  If a child wants to blow their ‘savings’ on a sweet or a toy which you know will be out of favour before the end of the week, so be it.  As a parent we will always hope that the general education we provide will help the child make a better choice.  In saying that, the best lessons are learnt through mistakes.

Our feeling is that pocket money at an early stage should be a small amount.  Giving large chunks of money to a young child only seems to send the message that money grows on trees!  By saving slowly and negotiating due to a child’s perception of ‘need’ there is always education and balance between giving money and using pocket money.  

It is also an interesting option to give a child a slightly larger amount and introduce the idea of savings, tax and superannuation to immediately show how money works in the bigger adult world from an early stage.

As a child grows up, pocket money takes on a different role and providing chores to supplement money a child receives should help teach the value of money and begin to instil a work ethic.  I am interested in others ideas regarding giving small or large amounts of money to kids or whether people put money in the bank and don’t even broach the subject of pocket money at a young age.

Do you give money to your child, do they have to earn it and how and when did your child come to understand the value of money?

Euan



Our kids' first Pocket Money

When our girls were aged 6 and 8, we started giving them pocket money.  Just a small amount, but we wanted them to start to learn about the value of money.  Our idea was that they would get a little money each week from us, and also have the opportunity to earn more by doing some extra jobs around the house - like vacuuming, weeding or cleaning the car.  Each week when the junk mail arrived in the letterbox, the girls looked through the toys and stationery for sale.  This was part of our plan - the girls would see something they wanted, then save up to buy it.

However, there really wasn't anything that they wanted enough to save up for (apart from the giant trampoline for the back yard which would have taken them about 10 years to save up for - too long to really contemplate!).

When their birthdays came around and with them extra money from relatives for birthday presents, I took them to the shops to look for ideas of what they might like to buy themselves.  Before we went, they counted the money they had so far - but didn't take it with them, as I told them it was better to wait until after their birthdays to buy something for themselves, as they may receive the toys as gifts!

At the shops, both girls found things they wanted to buy - but for less money than they had, so there was no need for them to save up their money - or incentive for them to do any extra jobs to earn more money.   Since they'd been getting pocket money, they had bought themselves things - but always within their means - just buying what they had enough money for there and then.



How can we teach our kids to save? 


So I began to wonder, how could we teach our kids to save, when they did't seem to have anything they want to save for?   They're just generally content with what they have and when they do see something they want, when they see how much it costs and that they can't afford it, they just shrug and forget about it.

One thought I had was that perhaps we weren't leading by example in this case.  We don't buy ourselves a lot, and the girls had never seen us 'save up' for anything.

So, I came up with a plan.  We were off on a family holiday to Bali later that year, and had decided that for spending money, we'd take what I could manage to earn with my extra jobs here and there as extra spending money (Being a full-time mum I just had casual work here and there). 
 I did have a target I wanted to reach, so I made myself a chart, with that target on, and gradually coloured it in as I earned money to show how I was working my way towards a goal, and saving up for something.  I hoped that this visual chart, would demonstrate to the girls that you can set your goals high, and work or save towards them.  


Using a Savings Chart


 Here is the chart I made for myself to show my savings progress.

 I printed a table of blank squares from the computer. Each square represented $10 I wanted to save, so I coloured them in as I earned each $10. The girls then came to see what  I was doing when they saw me using their coloured pencils at the table - colouring in!

Mostly they were curious as to why I chose the colours I did -and why so many different ones.  They seemed rather uninterested in the whole chart and savings idea - but I stuck it up on my wall anyway - for me!!

Then, the next day I noticed our younger daughter had her money box out at the table, and was drawing.  When I went over to see what she was up to, I found that she'd drawn her own savings chart and was counting her money to colour in the squares!    I was so pleased that she had taken on the idea and was using it herself.

On my chart I used each square to represent $10, she had chosen each square to represent 10c, and only wanted to save her 10c coins for this particular item. I helped her find how much the baby Zhu Zhu pets she wants to buy would cost, and check the number of squares she needed. then we found a separate money box for her to save her 10c coins in!   As you can see on the chart - she almost had enough saved for one at this point! (that was after a mammoth effort helping us mulch the garden at the weekend, for which she was well rewarded!)

She also decided to make another chart showing what she was saving her 20c coins for and our eldest daughter also made her own chart to start saving.

It just goes to show how important leading by example is.  Our kids want to be like us, so we also should strive to be the best we can be, if we want the best from them too! Teaching by example can be very effective indeed!

First Savings Success.

The plan worked! 

After a while saving, our younger daughter reached one of her target goals!  She saved all the 20c coins she got from pocket money and small chores, until she had $10.

Then we went to the shops to buy what she had saved for.........

Very cute! 

What an achievement for a little girl to stick at a savings plan and watch her progress and ultimate success!

What have your kids saved up for?  How have you helped them?

Saving for something bigger

After the success with the savings chart, it took a long while before our girls found anything more they really wanted to save for again. It wasn't until a couple of years later that a good friend of the girls got a Nintendo 3DS for her birthday, and after seeing that and having a play on it, they decided they wanted to save for one for themselves. (Our girls were now aged 8 and 10).

Now at $169 - this was a large ask and was going to take them a long time to save for - but we decided to try again to encourage them to save.

Where to start with such a large goal?

We sat down and looked at what money they had in the bank, how much pocket money they got, and a list of chores for money which we created at the beginning of the year.

Together we worked out a manageable plan that would allow each girl to save up for a 3DS over the next 6 months!

They each made up a book to keep a record of money earned in, and I made them special covers for these books.  The younger daughter decided she wanted a pocket on hers to put in pictures of things she cut out from junk mail catalogues that she might like to buy. (She wasn't completely sure if she wanted to buy a 3DS or more smaller items!)

After one week they had saved over their target for that week and were still keen.  They were taking some encouragement to do some chores for cash sometimes, but at their age, to stay focussed on a long term goal is a difficult thing to learn to do - particularly when you're aiming to save $169 - and one job only gets you 10c!

But they could already see their money growing, and the more it grew, the more motivated they got!

We also told them that if they stuck to their goals and worked hard to earn and save this money, then we would help them out.

Smaller targets and constant encouragement

With weekly targets to aim for - and the long term goal of the 3DS, the girls were set to learn plenty over the following months. Goal setting, breaking things down into more manageable portions, the value of money, and the ability to stay focussed.

In order to help them learn these skills and achieve their goal, we as parents needed to help them stay on track and keep them encouraged.

Have your kids saved for anything big?  How did you keep them focussed for a long term savings goal?

Big Success!

As our girls neared their savings goal for each buying a Nintendo 3DS,  we as parents decided that we would rather our girls bought themselves something with more uses and possibilities than just a gaming machine, so we offered that once they had saved their target money, we would pay the extra needed for them to get tablets instead.  

They were both beginning to use tablets in school, and we thought it would be great for them to have their own to explore and get used to.

 At the end of the school year, they had both saved more than enough money and so we went out on a shopping trip and came back with the above snazzy tablets! Two very lucky girls!

Since the tablets were new, and the girls really did work hard to save up for them, we let them play with them whenever they want to explore and learn how to use them.

The fact that they saved over several months to buy these tablets themselves, really gave them an appreciation of the hard work that goes into working for something they want - and they certainly saw the rewards of all their hard work and dedication.  And just the week after they bought their tablets, they were continuing to do chores week and so continuing saving for who knows what next. So good habits were formed!

How about you? Do your kids save? Do you? Do you think it's an important thing to teach them? and do you have any alternate methods for doing so?






4 Key things we've learned


1. Lead by example.
Whatever you're trying to get your kids to do, if they see you doing it, they will be more likely to try it for themselves.

2.  Desire is the driving force. 
Kids can understand the value of money and save for things at a young age if there is something they desire.

3. We all need Motivation and Encouragement. 
Words, charts, pictures and written records are all ways that can help kids to stay focussed on a savings goal.
Some kids, just like some adults, are more self motivated and disciplined than others. Kids, just like adults need help to stay motivated.

4. Saving for something helps teach the value of money.
When kids see, understand and most of all experience the hard work of earning money to buy something they need, they do learn to appreciate the value of what they are spending their money on more and choose more wisely.





So where are we now? 

Our girls are now aged 11 and 13. They recently saved up money for a family holiday to Japan. They saved their pocket money and birthday money, and also did chores here and there to earn extra.

We also recently found another way to help our girls with chores and earning money.
Our eldest daughter now has a fixed 'job' and time of week to do it.  Each Sunday morning at 9 am she cleans my car inside and out and so has a regular weekly 'pay'.
From memory I was about her age when I started my first 'job' as a paper girl - delivering the Sunday papers each week.  I think the discipline of having a fixed time and job certainly helps and she's stuck to this now for several months, enjoying having that regular small income.

We're also now trying to teach our girls a little more about savings by getting them to put away 10% of all their earnings, including pocket money, into their long term savings accounts.  10% doesn't seem that much to them and if we can get them into this habit early, it will hopefully set them up for good long term financial money and savings habits when they leave school and start to earn a full time wage.


How about you?  Do you give your kids pocket money? Do you encourage them to save for bigger things they want?  How do you teach your kids about money?