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Children Model Their Parents

Every child development specialist and psychologist will tell parents that the best way to teach a child anything is to model it. Children emulate their parents’ behaviors, both good and bad. If children see their parents paying bills regularly every month and hear discussion of responsible spending and saving, they will see this as a valuable behavior and want to copy it.

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Another important step, as soon as children begin to be aware of money and its function in our society, is to teach them with the hands-on lesson of receiving money and learning how to spend it wisely. This is not taught quickly or overnight. Every child who gets money wants to immediately run to the store and spend it – on anything! Letting a child do this and then living with no money to buy anything for a week or so, is a good lesson in itself. Then, the lesson of budgeting can begin. When a child receives an allowance or money for special occasions, it would be wise to sit down and have the child “map out” what he/she would like to buy with the money and how much each item to be purchased will cost. It is also important that the child understand what he/she may have to do without if the money is all spent immediately. Encourage the child to spend only a part of the money now and hold onto some of it for purchases later in the week.

Children and Savings

It is never too early to encourage, or, when necessary, to demand, that a child save part of what they receive, either from allowance or for special occasions. Have the child make a list of “big ticket” items he/she may want to purchase in the future. Go to the store and find out how much these items cost. Make a list with the child of the items and the cost of each, posting the list in a visible place. The next step is to help the child decide how much he/she wants to save out of each weekly allowance amount to go toward the first purchase. Then, the amount of time necessary to save for the item can be calculated. Each week, when allowance is distributed, the child will then either give the agreed upon amount back to parents for saving, or, if the savings will continue for quite a while, the child can open a passbook savings account at a local bank.

Another way to encourage savings on the part of a child is to offer to match whatever the child saves and put it all into a savings account. This matching should be done for purchases that are farther into the future, such as a car or college. Receiving monthly statements and watching the savings grow is pretty exciting for a kid.

As parents teach their children to save and spend responsibility, they should share their own spending and savings habits with their children as they grow old enough to understand the value of money and how much things costs. Children who see parents saving for new appliances, cars, a larger home, or college, and paying their bills regularly are far more likely to do the same as adults.