Friday, June 1, 2018
Teaching Children to Save
This is something I always get excited about. Children are a relatively blank canvas and most haven’t had any real experience with money yet. We also know that kids learn most of their habits from the adults in their lives. This could be a good thing or a huge problem.
Unfortunately, here are some statistics of adults today:
• Americans owe $1.1 Trillion in student loans debt and $845 Billion in Credit Card debt.*
• 1 in 4 Baby Boomers has nothing saved for retirement.*
• 52% of Generation X expect a decrease in their standard of living when they retire.**
• 39% of Millennials worry that they will not have enough money to retire when they are ready.**
Fortunately, this gives us an opportunity to create those financial habits in our kids that we wished came easier to us. Giving children a basic foundation to understand how to properly budget and save for the future is extremely powerful.
One of the best and most impactful lessons is the importance and the value of delayed
gratification. You can teach this with simple and easy to understand concepts. Here are two ideas to get started:
1. Offer your child one M&M right now, two M&M’s if they wait for five minutes, or five M&M’s if they wait ten minutes. This is a simple way to teach your child about savings and compound interest that can be earned the longer they wait.
2. Do they have that one game or toy that they really want? Help them set a goal to earn enough money to buy that toy or game. Then create a way for them to earn that money through a chore chart or activity chart or let them be creative with ways to work to earn money towards their goal.
Guiding this learning at at young age can help them to build a solid foundation for good money management habits when they grow up. Here are some simple concepts that can kickstart your child’s early learning.
1. Do you need it or want it? What is the difference?
2. Wait! Some things are worth it. Or they may realize they don’t want or need it as badly as they thought.
3. Share what you have earned.
Taking these simple actions is a great way to set a positive example for your children about how to properly save for the future.
*ACL Retirement Survey, 2016
**”The Five Most Important Money Lessons to teach Your Kids” by Laura Shin, Forbes.com
Natalie Litchfield and her firm IFC are State Registered Investment Advisors. Past performance is no guarantee of future results. This is not a solicitation for the sale of securities.