Teaching your Child Good Savings Habits

Instilling good saving habits in your kid’s mind and how they practice their financials can be absolutely pivotal for their future success. One quarter of all Americans, or roughly 55 million, said they have no emergency fund saved up. Do you really want your child to be in that position when they become an adult? Optimistically speaking, by starting good saving habits early in your child’s life it will help give them that “financial muscle memory” and cause involuntary saving habits in their adult life. It is your responsibility to set them up for success and comfortability.

At Missouri Central Credit Union, our Buster Bear Savings Account is the perfect tool to build a foundation for your children’s financial future. With every $5 deposit, kids can earn prizes, interest is paid quarterly on the average daily balance over $100 and there’s no monthly fee!

We look at savings habits broken up into two categories “pre-high school” and “post-high school”. The financial processes and habits your children learn before high school can be exercised throughout their life. They are foundational and by putting them in a child’s context they are easily comprehendible at any age. Post-high school financial habits get a little bit more in-depth by diving into taxes, accounting, scholarships and more.

 

Pre-High School Saving Habits

We dive into top saving tips and habits we strongly recommend to practice before your kids go to high school, as well as throughout their entire life.

Children’s Savings Accounts

We believe children’s savings accounts are vital to your kid’s early saving success and throughout their entire life. This is “home base” for your child’s money, a dedicated place to save. The Buster Bear Savings Account opens up a financial stronghold to kid’s age 0-18 (with a joint account owner). Getting children excited about financials can definitely be difficult; however the Buster Bear Children’s Savings Account has perks your kid is sure to love! With every $5 deposit kids can earn their own prizes. Let’s be honest, what kid doesn’t love the thought of prizes? A savings incentive they will truly love. They get their own statement, which can be a great talking point with parents. Also, interest is paid quarterly on the average daily balance over $100. This is really cool for kids to see that their money is actually earning money!

Little Boy Whining

Discussing What They Need vs. What They Want

“Kids will be kids” describes children’s behavior to a T when it comes to finances. It’s just natural behavior for most kids that as soon as they get a small amount of money, they want to blow it at the toy store. This is where parent’s communication about discussing what people need in life versus what they want in life comes in to play. Kids need to be aware that they need the essentials: shelter, clothing and food. Everything else at that point in their life is just an extra. This will hopefully set them up in life to not impulse-buy as much, and save money for the items they actually need.

Help Your Child Set Savings Goals

Setting goals with finances can really help your kid connect the dots in their mind, and start to comprehend the benefits of saving. If your kid gets $15 per week for an earned allowance, and they want a video game that costs $60, track their saving progress on a calendar. They will understand that saving for 4 weeks straight will allow them to buy that video game they are really wanting. But if they spend their weekly allowance as soon as they get it on smaller items they don’t necessarily want, they will soon understand the benefits of saving “long-term”.

Have Your Children Earn Their Allowance

Having your children earn their allowance will teach them possibly the most important lesson in life. It shows the value of hard work. Your child will start to gain satisfaction for the work they’re doing and the money they’re earning for it. Double that up with depositing the money into your children’s savings account, they will inevitably realize the true benefits of working, earning and saving.

Track and Explain Your Child’s Spending

By tracking and explaining your child’s spending patterns this will allow you seek opportunities they could alter to improve their savings goals. Our Buster Bear Savings Account allows your kid to receive a statement every quarter. You can explain each deposit they made, money they withdrew for expenses or how their money in savings is earning them even more money! 

Savings Milestones & Incentives

Another great way to motivate your child to save is by implementing a savings milestones and/or incentives program. Similar to a retirement fund, if your kid has a savings goal that might take them awhile to save for, you could match a percentage of each dollar they save. Or as an alternative, a savings milestone could be discussed. As soon as they save $100, you could reward them by throwing in another $25. This will further enforce the benefits of saving.

Act as Your Kid’s Creditor

We all know kids get excited and anxious, especially about the hottest new electronics or video games. Another great way to give your kid real-world financial experience is to act as your kid’s creditor. If a new gaming system comes out and your child needs $100, loan it to them on the condition of not only paying it back, but adding a little bit of interest as well. Most adults know this is how the financial world works, so your kid needs to be prepared for what’s to come.

Be the Savings Example

Your child looks up to you as their parent and role model. By being a savings example for your kid, this provides validity to all these financial habits you are teaching them. This is one area where you really need to walk the walk, and not just talk the talk.

The “Open-Wallet” Policy

Even if you can afford it, avoid being an open-wallet to your kids. They will soon understand that when they grow up, purchases in life must be worked for and earned. If they want to buy something, explain that they have x amount of money in their bank account. It’s very common that when they understand the purchase is coming from their savings or bank account, they soon realize it’s not an item they really need to buy.

Teenager putting money in a piggy bank
Post-High School Saving Habits

The saving habits we have discussed prior are great for setting the foundation for good savings habits. When they get into high school, things start getting a little more critical because they are that much closer to flying the coop and becoming an adult. If you have practiced these tips with your kid so far you are doing great, but there is a little more work to do financially once they have reached high school.

Teach Your Kid About Taxes and Accounting

Many kids work part-time throughout high school, so they start experiencing how the time they spend working and the taxes that are taken out directly correlate. We strongly recommend take your high schooler to your in-person tax appointment each year, or sitting down with them and walking them through the process if you prepare your taxes online. Most high school programs require a personal finance class to graduate, however going a little further in-depth and answering any real-life questions your child may have can be extremely beneficial to their future financial success.

Involve Your Kid’s in Adult Money Decisions 

The complex financial process of buying a house is a great example to explain serious financial decisions. There are many steps involved in the process of buying a house: saving, apply, getting approved, the down payment, payments over time, interested accrued, etc. By breaking this process down and explaining each step, your child will get invaluable financial insight that will undoubtedly help them in the future.

Teach Your Child About the 3 Types of Saving

The three types of saving: personal savings, emergency savings and retirement savings are all crucial parts of an adult’s finances. Breaking each category down and explaining will really imbed the importance of savings in your child’s mind.

Communicate with Your Children About the Importance of Saving

Communicating with your children about the importance of saving is one of the best things you can do as a parent. They will understand there is no barrier about finances, and they can come to you at any point in life for financial advice or direction. From opening a bank account for your child, to discussing retirement savings, this tips and habits are something child will benefit from.

If you’re ready to open up your child’s first savings account, stop by Missouri Central Credit Union to discuss the Buster Bear Savings Account.