How to Teach Kids About Saving Money: An Expert’s 5 Tips

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If your kid was fortunate enough to receive some money during the holidays from a generous grandparent or family friend, it’s worth using the moment to help them learn some basics around saving (and spending). Holiday money gifts provide a great opportunity to start putting cash into context, and these five tips can help get you going.

1. Start teaching the value of a dollar.

Kids don’t really start to become wise to the concept of money until around age seven, according to child development and behavior specialist and parent educator Betsy Brown Braun. You’ll know it’s happening when they start bugging you about how much things cost (thus forcing you to acknowledge the uncomfortable reality of exactly how much you pay for your latte habit). But you can start laying the groundwork earlier than that.

“Talk about money whenever you can, as appropriate,” Braun said. “Talk about how much things cost, and what else you could buy with that money.”

That might mean discussing how much it costs to fill up the car, to buy snacks for the class, to purchase that very dark, very fancy chocolate that mom refuses to share with anyone. Don’t force it down their throats, just answer comfortably when one of them comments. Money is hopelessly abstract until you start attaching numbers to things, but you can use the items they want — or have already received — as reference points. Wow, Auntie JoJo gave you $50? You could get that American Girl stand-up piano!

2. Create three buckets.

One of the challenges with gifted money in particular is that it has that unreal, playing-with-the-casino-chips feel to it. So, Braun suggests that early on, parents introduce the idea of the three Ss. “Most parents I work with subscribe to this idea: spending, saving, and sharing,” she said, “I subscribe to that, too.” The idea is simple: when money comes in, an amount is automatically allocated to each bucket. (BTW, that amount should be up to the child).

Explain that Mom and Dad use that system, too; on payday, some money goes to bills (from internet to groceries to electricity), some goes to savings, and some goes to causes that are important to the family. The more this is a standard, out-in-the-open practice, the more your kid will be cool with the idea that when they get a check from grandma, the goal is not to immediately spend every last cent.

3. Practice pressing pause…

This one’s a lifelong lesson, and while children are not exactly known for delaying gratification or controlling impulses, saving for something special can help plant the seeds of patience.

So, if your kid has banked some serious bucks, talk to him, in kid terms, about what it represents. Braun suggests asking if there’s something he wants to start saving for. You might also float the idea that, while it might be fun to just spend it right away on silly little stuff, in six months he might come across something cool and special that he really wants—and if he has already blown all his cash on slime and slime-adjacent accessories, he’ll probably be bummed that he doesn’t still have that money.

4. … but allow them to blow it.

That said, the best lessons kids can learn about money are the ones they’ll teach themselves… when they screw up. Maybe they blow their savings on Pixy Stix (and a tummy ache) or a bright shiny object that they use once and only once. Maybe it’s an item that turns out to be a piece of junk, or maybe they buy something really special but don’t take care of it properly.

“You have to have the experience of doing it wrong in order to do it right,” said Braun.

5. Remember: it’s monkey see, monkey do.

You know what’s coming. “Your children are watching you all the time and they learn what to do and what not to do by watching you,” Braun said. You can tell your kid how to be responsible with her cash all you want, but if she sees you making irresponsible choices and then dealing with the consequences later, well… don’t be surprised if she’s not too keen to spend her spare time researching the best interest-bearing savings account.

So, let her watchful eyes inspire you to get your own financial house in order. Or, at the very least, to stop buying all those matcha lattes.

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Shannon Kelley lives in Santa Barbara with her son and husband. Her work has appeared in Elle, The Washington Post, and The New Republic, among others; her book Undecided was an Amazon bestseller (Women, Business). Tweet her @Shannon_BKelley.