Financial Literacy for Everyone

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July 15, 2016

How often do you discuss money with your children? If your answer is "not often," you're not alone.

Five Ways to Encourage Good Saving and Spending Habits in Your Children

There is an opportunity to help your children form strong spending and saving habits at an early age, and doing so can have a concrete impact on their futures. For example, recent research suggests that children with savings – even as little as $1 to $499 – are four times more likely to go to college than children with no savings at all. There are many reasons why it's beneficial for children to learn how to manage money from a young age, and getting started sooner rather than later can drastically shape your children's financial futures for the better.

Here are five ways you can encourage your children to develop good saving and spending habits.

Find a balanced allowance. One reliable rule of thumb for weekly allowance is to give your children $1 for each year of their age. For example, if your child is eight years old, you would give her or him an allowance of $8 a week. Of course, one size does not fit all, and you can adjust this allowance to fit your family rules and values.

Reward them for saving. Back-to-school shopping presents a great opportunity to teach your children how to differentiate wants from needs. Set a firm school shopping budget, and make a list with your children of what they need for school. Go over their list to see which items are really necessary versus which items are wants. Once you've determined what they need, help them calculate how much is left in the budget to spend on wants. Consider rewarding your children by giving them the surplus money to spend as they choose – but only if they've covered all of their necessary supplies first. If you have a teenager who's hoping to drive a new car soon, consider matching his or her savings.

Take them to the bank. Middle school is a good time to replace that savings jar with a savings account, and if your children have been saving cash for years, it can be very rewarding to take that money to the bank or credit union and open their first account with it. This is a great way to introduce them to the concept of interest, and how savings accumulate over time when left unspent. Visit the Consumer Financial Protection Bureau's website for more information on savings accounts for children.

Talk to your children about essential expenses. As your children enter high school, you may want to consider delving into more complex financial concepts with them. If your teen has a paid job, review their paycheck with them and explain where the money goes and why – for example, if money is withheld for tax purposes. Or talk to them about the larger expenses on the horizon, whether it's a car or college tuition, and discuss all the financial pros and cons of these investments.

Help them earn their own money. Earning income through hard work is one of the best ways to learn the true value of money. Encourage your children to earn money, whether it's through setting up their own lemonade stand, doing chores around the house or neighborhood, or, if they're teens, getting a part-time or summer job. This helps your children supplement their allowance and teaches them the real-life value of working.

Bottom line: Learning how to save and spend wisely is crucial to good money management, and teaches other important values. The best way to help your children build solid financial skills is through practical, age-appropriate lessons, which are relevant as they grow into young adults.


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This article is intended to provide general information and should not be considered health, legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

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