Building Healthy Savings Habits in Children

It's never too early for kids to learn how to handle money. Make it a game now, and they'll be ready to play the money game when it's time to enter the real world.

From toddlers to teens, no child's education is complete without a few lessons in how to take care of money. Young children have a very short attention span, so it's important not to reach for the moon too early. Goals that can be achieved in a couple of days are realistic, but having a long-term horizon might be too much.

The trick is to get started as early as possible. Try giving a two-year old a sticker for cleaning up her toys. Once she reaches ten stickers, she can get a small princess doll. Substituting other tokens for real money is also a great way to get started, because kids can relate to these playful markers. You also don't have to worry about anybody ripping up a dollar bill or swallowing coins.

Graduate from stickers to play money, and then to real money in a piggy bank. It's still the same procedure for you-help the kids collect riches of some kind to earn various rewards. For them, it's a whole new game every time you step it up. Everybody wins! Getting closer to the real thing can give kids a sense of accomplishment because they get to do at home what mommy and daddy do in the outside world.

Step it up

Those cute and precocious toddlers eventually grow up and go to school. That's when you can introduce a small weekly allowance. At this age, kids understand that money actually buys things, especially if they've learned to trade tokens for trinkets. By then, their firefly attention span has expanded, and they're able to set more long-term goals.

This training takes some tough love, though. In order to teach your child the value of saving, you can't cave in to "I want that!" demands on the spot. Instead, offer a gentle reminder that the allowance is growing back home in the piggy bank, and soon he can buy that video game or those flashy designer sneakers with his own money.

Cash is everywhere

Mom and dad are not alone on this educational journey. There are children's books about piggy banks and savings, not to mention computer games and websites on the topic. Some of these resources may not look like a financial education, but there's help inside anything that can drive home the importance of collecting a lot of small items (like coins) to earn larger rewards (like a toy).

By the time your kids are ready for their first summer jobs, you'll have prepared them to take good care of the cash that they'll earn. Lessons learned early in life tend to stick with them, even becoming part of their personality. It's a prime opportunity to get the kids ready for a healthy attitude toward finances.

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