We hope you’re enjoyed our first post in July in terms of steps you can take to increase your children’s financial literacy. Next up…
Steps you can take to stress the importance of saving
Needs, wants and wishes
For those that work with 1st & Main and have engaged in the financial planning process you are familiar with this concept. We tier and stress test these categories of goals and we should stress this to our children as well. Items like housing, food, clothing and healthcare should of course take precedent over going to the movies, buying the latest sneakers, video games or the latest iPhone. It goes without saying your children should have a budget too.
Set savings goals
As we outlined in our first Kid’s Corner post 10% is a good place to start. If they want (not need) the latest sneakers, video game or iPhone help to set a savings target (sound familiar?). If you pay your children $10 a week in allowance how long will it take at a 10% rate of savings to pay for their wants or wishes…?
Let them earn
For younger children this is almost exclusively allowance. Start small and start young. For middle and high school age groups it is essential that their babysitting, lawn mowing, lemonade stand or dog walking is subject to the same savings targets. In the age of Paypal and Venmo we find a lot of their revenue comes to parents anyway, a great opportunity to help guide them towards savings.
Provide the means to save
This is pretty straight forward. For the littles a piggy bank is a timeless savings vehicle. For the teens take them to the bank to open a checking and savings account or use one of the countless apps that have emerged over the last few years. My family has chosen Greenlight which has spending and saving features as well as parental controls on what can be spent and where.
Incentivize
Similar to your employer’s matching component in your 401(k), create incentives for your children to save towards that big ticket item. Mirror your employers matching formula to help get them to the finish line. We find this is more effective than becoming your child’s creditor.
We hope you are finding this helpful, and please do not hesitate to send questions your children ask you! We’ll be sure to add it to the Kid’s Corner n the coming months.
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