Teaching Your Kids About Saving, Spending, and Sharing Money

Money is daily. You may not think of it that way. But every day you and I encounter saving, spending, and sharing decisions. The grade of fuel you put in your car, whether you select name brand or generic grocery items, if you choose to support a fundraiser, even coffee to-go or coffee at home is a financial decision. Every day you make little, and sometimes large, money decisions. And your children will be faced with similar decisions soon enough. If you teach them now to be a good steward of their resources and how to develop a healthy, positive relationship with money you may avoid painful lessons down the road when the stakes are higher.

The age of your child affects the complexity of the lessons you teach your child about money. But you can start teaching value lessons with a very young child. You may have even seen children using financial principles with something other than money at a very young age. Watch a group of children with their Halloween candy or treats after a 4th of July parade and you will witness commerce—trading, saving, sharing, valuation. They seem to know that a Reese’s cup is worth two Milky Ways and on and on. They understand value and the idea that once you give that piece of candy away, it doesn’t come back.

Working with your children now helps all kids learn the value of hard work and that money isn’t scary. Most kids find money interesting, but may struggle to implement healthy habits without your help.

We suggest you explore three basic ways to approach money: Saving, Spending, Sharing. Breaking it into categories keeps the money management simple. The three S’s help a child remember what we do with our money. You can adjust the level of learning based on your child’s age range: preschool, elementary school, middle school, and high school.

And don’t worry, it’s never too late to jump in and teach your student something that will benefit them every day of their life. It’s worth your time.

Let’s begin with:

Saving

Saving is a very important principle to teach your child. And there are a few ways to explain and explore the idea without completely losing their attention. We mentioned candy earlier as a good way to demonstrate the “here today, gone tomorrow” nature of money. You can only use money once.

So start with a small pile of candy or sticks of gum or something small they value. Discuss the ability to enjoy the candy next week if they save it now. Maybe even point out that next week may be a better time to enjoy the candy, but they aren’t able to if it’s gone. This visual shows a child what happens if we don’t save. So you can start there with any age–plus everyone learns better when candy is involved.

It’s important to teach your child the value and the habit of saving now.

Why do we save? How do we save? When should we save?

There is no magic in discussing this “S” first. If you think they’d be more receptive to learn about Spending first we encourage you to jump to that section and start there. (Just remember to circle back to Saving.)

Because saving is a concept that can be difficult to wrap our minds around it helps to use visuals to show your child how to save. Starting with candy is one way. And a concrete goal helps a student understand the process too.

Try this Saving Lesson:

1. Select a goal to save for. It can be small or large, but not so large that it takes more than a few months to save for. To begin you want them to see some positive results for their efforts soon enough.
2. Determine the amount of the “save for” item. If your student is older encourage them to do some research to see how their desired item varies in price at different stores or online sites.
3. Discuss their current income to be used toward the saving goal.
4. Break that “save for” goal down into smaller chunks. Use sticky notes to show your student how much it will take to save for their item.

Let’s say they want a new bike. If that bike is $100 and they have the ability to earn $10 each week write out 10 stickie notes with $10 on each.

Then use additional stickies to mark the dates you anticipate the intermediate savings goal will be met.

Now, before you walk away from your sticky-note-covered mirror or wall. Ask them what happens if they spend – instead of save – the $10 next week on a couple of movie downloads or snacks. What happens then? Use those dated sticky notes to push that bike-riding date out further in the future.

On the other hand, if they can earn extra money – add more $10 sticky notes – by doing projects around the house, outside of their usual chores, show them how stickies add up faster and the date advances closer when they add more to savings.

Older Children

With an older child you can toss in the idea of compound interest. Explain that saving the money in an interest-bearing account adds to their principle amount. You can add an extra, little sticky note to the wall every four sticky notes or so to simulate the interest earned on money they save in an account. Help them see their money grow faster with the addition of interest earned.

A young child can see the same savings example of the bike, but with a smaller goal. They may want a $15 horse statue with brushes and a feeding bucket to play with. Use the sticky notes in smaller amounts. Give them opportunities to help out around the house to earn an income so they can see how hard work pays off. You can tape the coins or dollar bills to the sticky notes if you feel the actual visual will help them more than writing the amounts out.

And remember a good learning technique for any new principle is to ask questions. As you teach them about money, ask clarifying questions to see if they understand or if they’re overwhelmed. Then adjust from there.

If you’d like some additional help in teaching your child about setting goals for their finances we welcome you to use this blog that offers seven tips for successful goal setting.

Spending

We bet you’re thinking Spending is an easy lesson. Surely, nobody has to teach somebody how to spend money. You might be surprised to learn that there is some necessary teaching to be done. Not every personality type enjoys spending money. Some children might experience anxiety or fear of letting go of their candy, coins, or birthday money.

Since your student will spend approximately 50% of what they earn, they should have a good grasp on how spending works. Walking through a simple budget is a good exercise to start with a school-aged child. A fairly standard personal budget is the 50/20/30 budget. This means a typical person will spend 50% of their income on needs, 20% on savings, and 30% on wants and donations.

A good exercise for your student is to track how much money they spend in a week or (for older students) in a month.

Every penny. They might be surprised.

If your student is young enough that they don’t spend much they could work with you to track your spending for the week on: groceries, utilities, subscription services, internet, eating out, clothing, etc.

Spending Lesson

Another good exercise for spending: Have your student get a piece of paper and jot down how much they think each of these things cost:

• Gallon of milk
• Monthly internet service
• Tank of gas
• A house
• Used car or truck and New car or truck
• Car insurance
• Pizza delivery
• New phone
• A weekly load of groceries

Now go over the list with your student. Have a good laugh together at the amounts they clearly missed and congratulate them for the price tags they got. Discuss the money required for those items and how you approach deciding how to buy or not buy those things. Keep the discussion positive and remind them the purpose of learning is to acquire knowledge you didn’t have before. Learning about money management is no different.

For bonus points, discuss how Spending and Savings work together. It may seem obvious, but go ahead and ask the question, “Can you spend money you don’t have?” For older students this opens the door to discuss the challenges and merits of credit and credit cards. Useful tools if your student understands how they work.

Sharing

Please don’t forget to teach this important financial principle to your student. Money is meant to be shared.

Do you remember the old folk story of Stone Soup? You can look up the details and various versions here or we will summarize it for you.

Some hungry travelers arrive in a village with only an empty cooking pot. The villagers aren’t eager to share with these unfamiliar people so the travelers’ begging is fruitless. Until one of the travelers fills the pot with water and drops a large stone in the bottom. The travelers begin to warm the water and the stone over a fire in the village. The villagers become curious and are told the travelers are making “stone soup” which tastes great, but it would be even better with some vegetables and seasoning. Different villagers agree they could spare an item to enhance the soup and even think they might like a bowl. So the villagers, individually, bring carrots, cabbage, herbs, onions, and other items until a wonderful stew is made and shared with all.

The tale has been retold in multiple versions as a way to remind us that together we can do much. A little added from a variety of sources adds up to a lot.

Ronald Reagan is famous for saying, “We can’t help everyone, but everyone can help someone.”

Teach your children the value of sharing.

Sharing Lesson

A good exercise with your child is to have them brainstorm a list of people they think might be helped by donations. There are no wrong answers here. They get an A+ for thinking of others.

If your student is stumped you could look at a website that shares lists of organizations serving others. Charity Navigator is one site that rates charities on financial health, accountability, and transparency. You can search by interest area, i.e. animals, health, the environment, community development, human services, and others. And even look through their Top Ten lists for things like: fastest-growing, celebrity-related, and even those top ones to avoid. Charity Watch is another site that evaluates charities. Teaching responsible giving is an important part of a Sharing lesson.

Help your child find a cause or a religious organization they enjoy and help them contribute a portion of their money to help others. We strongly believe when we give to others we are blessed in return.

You may also like to discuss the value of a person’s time. Talk about how much effort and time it takes them to earn the money, like the money they are saving toward their goal. And then show them that donating their time to help others is of great value too.

We Give Back

Our banks highly value community service. Our employees from our six offices have volunteered for more than 175 different organizations in just the last three years.

We congratulate your desire to help your student understand some principles of money management. Money is a tool that they can use to save, spend, and share with others. It’s important for them to learn healthy habits at a young age to enjoy, not fear, money and to avoid future painful pitfalls.

We hope your time spent with your child learning and exploring these life lessons and financial principles is priceless.

First National Bank Colorado is a community bank founded in 1901 serving Las Animas, La Junta, Rocky Ford, Fowler, Ordway, Flying Horse in Colorado Springs, and Monument.