3 Ways to Teach Your Kids to Save Money
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Debt in the United States is on the rise, growing about 11 percent over the past decade. In fact, according to the 2016 American Household Credit Card Debt Study, the average household is $132,529 in the red.
For a child, or even most adults, this number is almost too big to apply to real-world spending habits. As parents then, how can you set your children up for success?
Start early. Good money habits practiced at a young age means kids will have a good idea about how money works and the impact it has on their lives each day.
Open a Savings Account
My clients frequently ask, “What age should I start teaching my kids about saving?”
There’s no magic number that is perfect for every family, but I recommend around when the child begins elementary school. At this point, they’ve received gifts of money or gift cards and possibly earn an allowance. They are more likely to have made purchases and also have thought about things they want for future birthdays or holidays.
Opening a savings account teaches kids how to be responsible with their money and provides a tangible way to work toward their goals.
Make sure to look for an account with minimal fees, including a low minimum amount to open and no monthly charges. This is important as your child will likely start off with a small balance.
Make It Fun
Delayed satisfaction can be hard, so incorporate ways to make saving money fun.
Consider taking your child into the bank to meet with an associate, for example. As an employee at a community bank, I take pride in meeting with even our youngest customers. A team member can talk through the savings account and congratulate him or her on the huge step. Once the account is open, you can also make an event out of each monthly bank statement to celebrate the rising balance.
Another fun way to motivate kids to keep saving is to set a goal of something big they really want, such as a new bike.
Establish the amount they need to save and track against that amount each time they make a deposit. This provides the encouragement that keeps them on track for their goal and reinforces the reason to skip impulse purchases such as candy and small toys.
By learning this valuable lesson, your children will begin positive behaviors that will benefit them later in life when they decide to buy a car or their first home.
Engage Your Teens
High school is a great time to introduce children to a checking account, if they don’t have one already. Checking accounts are the perfect spot to deposit paychecks from their first job, and it gives them access to a debit card with their account, making purchases and withdraws more manageable for both you and your child.
As they near the end of their high school career, students should start considering their first credit card or a secured card, as it’s important to build credit worthiness early and take a responsible approach to credit.
Alternately, many banks offer a prepaid card specifically for students, which allows parents to designate the amount of money available and transfer funds as needed through online banking. This can be a good option — with built-in flexibility but minimal risk — to keep college students from racking up debt.
Keep It Regular, and Positive!
Don’t stress over how much your child is saving each month, especially in the beginning.
Regular contributions are good no matter how small they are and will help teach children how to prioritize their personal finances.
Kim O’Quinn is the branch manager of the Apex First Bank location. Established in 1935, First Bank is a North Carolina-born, full-service community bank with more than 90 branches across the Carolinas, including branches in Apex, Fuquay-Varina and Pittsboro, and one opening in Raleigh in the spring. The First Bank team is committed to providing best-in-class financial solutions with a hometown touch. Learn more at localfirstbank.com.