In a recent post, we talked about opening a custodial savings account for a child, explaining how to do that and the many benefits of teaching kids to save. Now let’s look at some ways to cultivate good savings habits in our kids.
Set the parameters
Maybe you’ve heard of the 10-10-80 framework. The idea is to give 10 percent of income to God’s work in the world, save 10 percent, and spend 80 percent. That’s a fine idea for adults, but for kids, I encourage something more like 10-50-40. You see, kids don’t have many of the expenses they will have later. They don’t have to pay for housing, groceries, insurance, and so much more. That puts them in a great position to save aggressively.
When they’re super young and receiving very little, 10-10-80 is fine. But soon enough, get them in the habit of saving more. Have them save for more expensive things that’ll take longer to save for, such as a skateboard or bike. You can build this important habit in your kids by closing the bank of mom and dad, or at least reducing its operating hours!
Keep it real
As ironic as it might sound, psychologists say one of the most damaging things we can do to kids is to give them too much. In the real world, every day is not their birthday; people won’t just give them things. They’ll have to plan for what they want and save for it over time. So, requiring them to buy some of what they want, even if it takes some time—in fact, all the better if it takes some time!—will be good for them. By setting aside a portion of every dollar they receive or earn in a savings account, they are living in the real world, and that’s a very good thing.
Make sure they’re involved
If you’ve opened a custodial account for your child (and I hope you have!), you are responsible for the account (you’re the “custodian”). However, it’s important for your child to play an active role with the account. That means consciously choosing to put a portion of any money they receive into the account on a regular basis. It’s important for them to make that decision and to experience the money flowing from their hands into the account.
“Visit” the account with your child
If you live near a branch of the financial institution you use for your child’s custodial account, visit in person. Have them hand over the money they want to deposit to the teller. They will probably get a printout showing their current balance and the interest earned. Money has become very abstract, with credit cards, debit cards, and digital wallets. Especially when kids are very young, it’s important to make this whole saving thing a hands-on experience.
If you can’t visit in person, “visit” the account with your child each month online so they can see their balance and how much interest they have earned.
Give savings a purpose
Saving money is a good thing. Saving too much isn’t such a good thing. It’s interesting that the Bible uses a similar word to describe people at both ends of the savings spectrum. It says “fools” spend whatever they get” (Proverbs 21:20, NLT), and, to the person who had saved up so much that he anticipated a life of ease, God said, “You fool! This very night your life will be demanded from you. Then who will get what you have prepared for yourself?” (Luke 12:20).
One way to avoid raising hoarders is to encourage your children to save for specific purposes. On a piece of paper, have them keep track of their total savings and how much of the total is being saved for a new bike, spending money for an upcoming vacation, or some other purpose.
Teach them why
It’s important that kids not just build productive financial habits, but that they also understand why each one is important. With savings, God says it’s wise to save (Proverbs 21:20). It’s simply what good stewards do. Having money in reserve enables us to handle unexpected expenses (maybe something they own needs to be repaired) and to buy what we want without having to pay the interest charges that come with debt.
Having your young children put 10 (or better yet, 50) cents of every dollar into a piggy bank may seem like a small thing. But it isn’t. It’s helping them honor God as they build an invaluable money management habit.
myCCCU’s SmartStart Savings account is designed to help kids learn about financial responsibility while watching their savings grow. By setting goals and making deposits, your kids can begin to understand the importance of saving for the future. It’s a great way to teach them valuable lessons that can benefit them for a lifetime. Learn more about the SmartStart Savings Account today!
Matt Bell is the author of Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management. He speaks at churches and conferences throughout the country and writes the MattAboutMoney blog.
This article should not be considered legal, tax, or financial advice. You may wish to consult a tax or financial advisor about your individual financial situation.