Teaching Children Life-long Saving Habits

How and when should you teach your children about money? What about allowances? What's the best way to encourage children to save?

Teaching basic money management skills to children is critical. Teach your children to become regular savers and responsible borrowers now so they'll be prepared when they're out on their own. Here are some suggestions to get started:

Under Age 5

Set up coin banks at home to help children learn how to identify coins and count money.
Introduce the concept of money by giving children small change to spend occasionally when you go to the store. Limit options to save time and minimize conflict.
Open an NWFCU Custodial Account to prepare for your child's future. Click here for more information.

Ages 5 to 10

Begin giving a weekly allowance to offer hands-on money management experience. An allowance makes it easier to learn how to save because children know they'll get a set amount of money on a regular basis.
Let children save for, and buy, something they really want. Saving habits for young children are reinforced with rewards, so saving must be tied to spending.
Give your children an NWFCU Moonjar. This all-in-one container has coin banks labeled "Spend," "Save," and "Share." Suggest that children contribute a portion of their allowance and cash gifts to each to teach how to spend wisely, save regularly and give to others.
When the "save" coin bank builds up, bring your children to the nearest NWFCU branch to deposit their money in their savings account. To open an NWFCU Share Savings Account, click here.
Don't forget about the free coin counters located in each NWFCU branch. This is a fun way to sort and deposit money.
Provide opportunities to earn extra money by doing additional household jobs - those beyond their regular responsibilities.

Ages 11 to 14

Include children in shopping tasks. Get them involved in clipping coupons and seeking sales promotions for necessary items. Get them exposed to what items cost and teach smart shopping techniques. Let them help compare product qualities, prices, return policies and warranties.
Encourage and suggest odd jobs such as babysitting, yard work or pet care.
Encourage children to use their own money to buy “luxury” clothing and accessories, beyond the basic needs.

Ages 15 to 18

Begin to discuss saving plans for long-term goals, such as college and cars. This should include discussing the purpose of a savings account. Click here for a list of members-only products and services.
Consider giving teens a seasonal clothing allowance, beyond their regular allowance. After discussing expectation, set guidelines and limits then let them make their own choices.
Consider helping financially responsible teens get their own checking account. Click here to learn more about our checking accounts.
Consider letting financially responsible teens use a debit card with their accounts.
Initiate conversations about credit, using credit responsibly and the importance of maintaining a good credit score

Allowance guidelines

Allowance amounts depend on several factors: age, maturity level, interests, responsibilities, and the family's financial situation.
At the beginning of each school year, sit down with children to discuss the allowance. Decide what things the allowance will cover. For example, older children may be responsible for paying for school lunches, transportation and entertainment out of their allowance. Include some money children can spend or save for anything, within limits set during the allowance meeting.
Let children make decisions and mistakes with their allowance. Don't give them more money when they overspend.
Put the allowance agreement in writing; include the amount, what day it will be given, what it covers, and any restrictions.
Review and adjust the allowance agreement regularly to keep up with children's changing needs and current costs.
Be consistent: set a specific time and day to give the allowance and stick to it.

Using money as reward or penalty

Don't link allowances to routine household chores. Children help around the house because they're members of the family; they get an allowance to learn how to handle money. Linking the two may result in children who won't do anything without pay, or children who decide the money isn't worth the work.
Don't link allowances to behavior - it confuses the issue and can become a source of conflict and manipulation.
Don't use money as a bribe for good behavior; you may end up with children who only behave for pay. It's okay to reward children for courageous or especially good behavior, if money or gifts are given after the fact.
Avoid paying for good grades. Children should do well for themselves and learn to set and achieve their own standards. It' may be unfair to children who work hard but are unable to attain high marks. Consider creating your own rewards system together.

Money & the Family

Include children in family money discussions. You don't have to reveal all the details of your finances, but give children a sense of your position and a statement of your family values, so they can understand boundaries, guidelines, and priorities.
Invite children to help when paying monthly bills. Discuss your family's money management style.
Have a family meeting to pick a family treat or trip to save for. Whether you save for a movie and pizza or a family vacation, discuss ways each member of the family can help reach the goal.
Consider paying children for extra jobs around the house that you would hire someone else to do. Make it clear that it is a job - not a family responsibility. Explain the job, offer adequate pay, and allow the child to refuse it.

Teach smart spending

As a family, discuss and establish age-appropriate guidelines for purchases. For example, even though children may earn enough of their own money from a job or gifts, certain purchases may be forbidden, such as vehicles or dangerous or destructive toys.
Organize shopping trips to buy things children want or need. Help them comparison shop, and make decision based on price, features and quality. Share your expertise with children, but whenever possible let them make the final decision.
Encourage children not to spend on impulse. Have them consider if they really want or need the item right now, and how long it took to earn the money they're about to spend.
Allow working teens to spend their own money. However, require them to pay for more of their expenses to prepare them for going out on their own.