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April 29, 2019

How To Teach Your Kids To Save


Date: April 29, 2019

Author: Kris Carroll, CFA®, CFP®

Estimated Read Time: 3 minutes


One of my Dad’s favorite quotes is, “Youth is temporary. Dumb is forever.”  In fact, he likes it so much that several years ago he made it the subject of a cartoon drawn of himself and my then five-year-old son Harlan.

Youth is Temporary Dumb is Forever

One of my favorite quotes is what Harlan said when he saw that picture. He pointed to the drawing of himself and said, “Hey look! I’m youth and Pops is dumb.” Now I don’t believe my father is dumb, but I do believe that was the first time he’d ever been called dumb and laughed about it.


Kids are only kids for so long and we have to start teaching them lessons about money early in order to help them develop healthy financial habits. National Teach Your Kids to Save Day was earlier this month, which means this is a great time to share some lessons that teach your kids about money.


I started giving Harlan an allowance of $5 per week when he was five. Each year he’s gotten a raise. He is now 11 and has an allowance of $11 per week. In theory, this $11 is for him to spend on his wants, such as a Lego set. Yet in reality, he saves almost every penny of it.


People might think Harlan’s tendency to save comes from being the child of a financial planner, but my six-year-old Violet will spend every cent you give her and she’s had the same upbringing.

Carroll Financial - How To Teach Your Kids To Save


What this really proves is that people are born with distinct money personalities and spending habits. Harlan is a natural saver and Violet is a spender.


They started showing these signs around the age of five. Though they’re young and have very different personalities, they both need to understand the same financial foundations in order to have a healthy relationship with money. I’m going to tell you how I taught Harlan these basic truths and give you tips on how to do it yourself.


Lesson #1: Teach your kids the difference between a need and a want.


The first lesson that young people need to learn is the difference between a need and a want. A need is something you have to have to survive. A want is pretty much everything else. In order to have the things we want, we have to save up money to buy them.


When a child asks for something never respond with, “No, we can’t afford that.”  This can create unhealthy anxiety about money. Instead, try asking him or her, “Is that something you need or something you want?” This generates the opportunity to practice telling the difference. Once they understand that distinction, you can begin to teach them to save up for the things they want.


Lesson #2: Teach your kids to give.


Two years ago we started teaching Harlan the importance of generosity by helping him give 10% of his weekly allowance to charity. We sit down together annually and decide where he will give his 10% for that year. It’s important that he takes ownership of this process, which is why this year he chose to support the Bill and Melinda Gates Foundation.


He made this decision because he liked the mission statement behind one of their child nutrition initiatives: “To help all women and children survive and thrive.” His dedication to helping other children thrive is what compels his generosity. Teaching your kids to give is about more than developing a healthy relationship with money. Help them understand the impact that their generosity has on others.


Lesson #3: Teach your kids things that are important to you.


Giving to charity is very important to my family, so I taught my son to give generously. I’ll do the same thing with my daughter when she’s old enough. People put their money where their hearts are. Helping children survive and thrive is important to Harlan and we help him use his money to do that.


Take the time to figure out what matters to you and your family and be intentional about teaching your kids why it’s important. What saving and spending principles have you found success with? Talk about these with your children. Begin the conversation.


Bottom Line: Spending habits are hard to change once they develop. It’s important to start teaching your kids to save and give as early as possible. Teach them the difference between needs and wants. Then instill the importance of giving and what is important to your family. Youth is temporary, but the lessons they learn are forever.


Financial Literacy, Investing & Saving

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