From Piggy Banks to Paychecks: Helping Kids Become Savvy Savers

Statistically, familial wealth depletes as generations are added to a family tree. Various factors affect family wealth over time, but the good news is that you can influence your kids’ and grandkids’ financial future by teaching money skills from a young age. One of the most important values you can instill in the next generation is the importance of saving. But how can families tackle this? Here are some ways to approach this based on the age of the child.

Younger Children

Learning to save begins with concrete experiences where money connects to outcomes. Start with a small cash allowance or earnings from simple chores, preferably paid in dollar bills or coins. Create jars or envelopes designated for different purposes – one for saving for a bigger ticket item and one for immediate wants such as a trip to the store for a treat. Talk with them about the kinds of things they want to save for, whether it’s a special toy or an outing, and engage them in researching the cost so they know how much they’ll need to save to reach their goal. Write the total on the container so they see it every time they put money in their savings. Perhaps print a photo of the toy or experience they’re saving for as a reminder. Once they’ve saved enough, be sure you make good on your promise and take them to get their prize. It’s very powerful for kids the first time they hand over money they saved and receive something they’ve worked and waited for.

What You Can Do

• Start with tangible experiences and set clear savings goals visible to the child.
• Fulfill promises to acquire desired items, reinforcing the value of saving.

Older Children

Link saving habits to chores to cultivate appreciation for earned money. To incentivize savings, pay a certain amount for chores, but double or triple the amount you pay if they put the money into a savings account. So for vacuuming the living room, they might make $2 in cash they can use right now, or $4-6 dollars if they opt to put the money into a savings account. Once they have money in a savings account, it’s a great opportunity to teach them how interest works, and some kids will be even more motivated to save.

What You Can Do

• Incentivize savings by tying it to chores and offering increased rewards for saving.
• Teach about interest through savings accounts to enhance understanding and motivation.

Teens

Teens tend to be motivated to save money for bigger ticket items, such as a coveted gaming system or other electronics, or even a used car. They may have a part-time job where they’re earning money, which is a great time to open a high school checking account (free at many banks with a parent account). Be sure to teach them how to move money from their checking to their savings account, where they can see their earnings accrue and anticipate achieving their goals. Money that stays in accounts accessed by a debit card can quickly disappear when teens are going out with friends or shopping online, so automating transfers from checking to savings from their paychecks or allowance can help teens save without thinking too hard about it.

What You Can Do

• Guide teens in managing earnings by opening checking accounts and automating transfers to savings.
• Prevent impulsive spending by setting up automated transfers from checking to savings.

By implementing strategies tailored to a child’s developmental stage, wealthy families can cultivate responsible financial habits that will serve their children well into adulthood. Want more guidance and resources from the Highland team about teaching kids about money?

Reach out to your advisor or contact us here and we’ll connect you with the right member of our advisory team.

Adult Children

Looking for some guidance on how best to support adult children financially? Listen to this Living Fully Conversation as two Highland advisors and certified Wealth Confidants, Kyle Thomas and Coleen Kroeger, advise John & Kelle Christianson on how to approach providing financial assistance to their three adult children. You can also check out the article, Family Matters: Strategies for Assisting Adult Children Financially, with key takeaways from the episode.