The habit of saving money is a crucial life skill, but it doesn’t always come easy or naturally. Starting the conversation early and teaching lessons about money at a young age will promote key principles as your children continue to grow.
Money-saving habits will help your kids financially plan ahead and prepare for major life events, like buying a house, getting married, or retiring from their careers.
Here are 3 lessons you can teach your kids early:
The Value of Money
T. Rowe Price’s 11th Annual Parents, Kids & Money Survey found that half of the children surveyed said they wish their parents taught them more about money.
Money is crucial in our day-to-day lives. Being open with your kids about earning, spending, saving, and budgeting money will prepare them for their future. Introduce coins, cash, credit, and debit cards, explain what a transaction is, and share how much you spend for basic needs. Exposure will allow kids to think critically about money early on, helping them develop habits as they grow older.
Saving Is a Habit
Most likely, your kid’s first interaction with money will be to spend it. But money isn’t just for spending, they also need to save!
Saving money can be hard to teach since it revolves around delayed gratification. However, saving teaches how to set goals and prioritize. Challenge your kids by choosing an item to save for (such as a toy, game, phone, or car). Kids can start with a piggy bank or bank account. Then they can work their way up to bigger savings plans during their adult life like a 401(k) or a 457 plan.
Money Can Grow
When it comes to investing or saving for retirement, time is everyone’s biggest ally. The earlier your kids save and invest, the more that investment will grow.
It’s important to emphasize that investing is not a quick process and is more catered to future and long-term goals. After learning the concept of saving, you can open an interest-bearing savings account. Go through the bank statement to show how their money is growing over time. Eventually, you can introduce bonds, dividends, and stocks.
If you want to go further in teaching your kids how to save for retirement, use our Retirement Calculator to show an estimate on a monthly CalPERS retirement benefit and visit Retirement for more resources.