Teaching Kids How to Give, Save and Spend

4 Oct

Save or Spend

How to teach kids about saving vs. spending.


Steven B.Smith, CEO of Finicity, believes the sooner we start teaching our children about the basic principles of giving, saving and spending, the better. Here are his tips:

Ages 4-7

  • Teach them to save. Based on Stanford University research, children who learn delayed gratification (patience) at an early age have a much better chance for success as adults. Label three jars or envelopes as “Give”, “Save”, and “Spend”. Every time allowance is earned or birthday money is received, teach them to save a portion of that income. Savings can be used to purchase bigger items they really want but require a much larger sum of money. It can also be used for teaching investment principles. Developing the habit of saving and patiently waiting will prevent them from becoming impulsive and emotional spenders.
  • Let them decide. Allow your children to make spending decisions but also let them experience the consequences of bad spending decisions. Do not bail them out! If your child wants to spend their money on a toy just because they have to have something now, let them, but also teach them that the toy they really wanted can’t be bought until they save for it again. This is a great way to teach them that choices have consequences!
  • Reward them: Start by teaching your children to take care of their space (bedroom, bathroom, etc.) Create a simple work chart where you can check off tasks performed. Establish a reward system where your child regularly gets the opportunity to earn a “job well done” prize. Since you don’t want your child to assume that every time they make the bed or pick up toys they should expect a payment, set clear standards and expectations around achieving the prize.

Ages 8-13

  • 10-10-80 money rule: Whatever “income” they earn, teach your child to save 10%, designate 10% towards a charitable cause of their choice, and to live on the remaining 80%. This simple money rule will cultivate in them the habit of regular saving (which is one of the secrets to long term financial success), to be generous (those who give tend to lead much happier, content lives) and to live within their means.
  • 15-day waiting period on major purchases: In order to teach your child about the dangers of impulse buying, implement a 15-day waiting rule on purchases. First, set a dollar amount, which will constitute a “major purchase”, then apply the 15-day waiting period to anything that exceed the set amount. Fifteen days can feel like an eternity to your child, so make it fun. Go on an online “bargain” hunt and see if you can find the item your child is looking for at the best price. Create a fun reward system for each day of the waiting period.

Ages 14-17

  • Investing basics: Investing can be a complicated topic, but there are ways to make it simple and fun, especially at this age. First, talk to your child about different ways to “grow” their money and the difference between short-term saving and long-term investing. Show them simple numerical examples of what returns a long-term interest bearing account can have on the bottom line. Introduce your child to simple ideas of risk when it comes to investing and talk to them about diversification concept – dividing their investment money into 5-7 different options to mitigate the risk.
  • Practical investing idea: A great way to teach your child about investing and risk is to designate a specific amount that you and your child will be able to invest together. Have them read/research simple concepts like a CD, money market account or a mutual fund. Once they’ve research and understood few of the options allow them to choose the investment path and have fun watching the fund grow!
  • Budgeting with technology: Because of their familiarity with technology, this age group is also a perfect candidate to be introduced to an online budgeting tool in order to manage their income in a way that’s familiar and natural to them. Once they have a checking account, a tool like Mvelopes will help them not only set up an old fashioned envelope based budget, but it will help them know instantly how much money they have available in each category (or e-envelope) for spending. It’s a great way to help them control impulse spending.

With age, your children can look for ways to perform various services to generate income. Sit down with your child, think through a list of jobs they could do for neighbors and family members. Help them determine what tools they would need to perform the job and how much those would cost. Determine competitive pricing for each job and let them go out and get some business!

  • Car washing can be a great way to generate extra income. Your child could offer single car washing options as well as car washing packages that would offer slightly discounted prices.
  • Dog walking or dog sitting could be another way to generate revenue. Kennels can be expensive, so your child could offer dog-sitting services that would include daily feeding as well as daily dog walking before and after school.
  • Babysitting is always a sought-after service, especially when there is an opportunity to hire a trusted neighbor. Help your child create a nice flyer that showcases the benefits of hiring them as a babysitter.




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