Teaching your child about the value of money is critical in todays economy. Back in the 1990s and early 2000s you could pretty much choose any type of investment and it would make money for you. Those days are gone. You’re much more likely to read a heartbreaking story about excessive debt or a mortgage that can’t be paid off.
Many of the economic problems in our society are the result of unrealistic attitudes about money. Of course, there’s no reason to go to the extreme of raising little misers–money is meant to be spent. However, it needs to be spent with forethought. Children need to learn how to save and how to spend.
The problem is that kids have no notion of what a bank is and what it does until they have jobs of their own. By this time, it’s almost too late to correct all the bad money habits they’ve developed.
After all, if ‘money’ has just been a five dollar allowance they used to run out and buy candy, how are they supposed to get the concept of why saving is important? There’s been no consequence for not saving, now has there?
Most parents will try a bribe-reward system which usually consists of some encouragement to save for something the kid really wants like a bike or video game. Most parents don’t have the intestinal fortitude to not buy it for their kids when the savings plan doesn’t workout the way they planed. Again, no real consequences to not saving.
This is where the idea of the ‘home savings bank’ starts to take root. Instead of taking the “pie in the sky” approach to teaching kids about money, try this–give your child five dollars a week for an allowance. When you do this, tell them that for every dollar of the allowance that they manage to keep until next week, you’ll give them an extra quarter.
Even if your child doesn’t get the concept right way, they’ll quickly learn to associate the fact that when they save money, they get more of it. It will become more apparent after a couple of week and the money “home savings bank,” grow bigger than their allowance. It’s a great way of encouraging kids to save — try it!