How to Share Good Financial Principles with Your Children: As Told by an Accountants and a Penny Saver's Daughter - Part Two
July 15, 2019
The second part of this mini series focuses on Saving. There are multiple variations of saving and they all depend on what it is that your saving for, for how long and why. Every adult understands the concept of saving at different phases of thier life, some sooner than othes. At what point in your life did you fully grasp the concept of saving? Was is it grade school when saving for a new bike? In high school when working a part time job to save for gas money and college tuition? Or was it as a young adult when calculating what is requried for the down payment of your first home?
When is a good time to start teaching your child to save? And how? Help your child understand the perks of saving as early as possible, usually when they begin to grasp the value of money. When they receive birthday cash, an allowance or even if they come across money unexpectedly (i.e. in the clothes dryer or along the sidewalk) take that moment to encourage them to put a little bit aside before going and spending it.
FUN TIP: A fun way to help your young child understand the value of saving way is to have a goal for something they are wanting to purchase on their own, a new bike, video game or the seasons new hot toy some nine year old YouTuber is posting videos about. Start with buying a transparent piggy bank or jar. Little ones can then visually see their savings increase the more they put into their savings jar or piggy bank. Along side the savings jar or piggy bank print out a Savings Thermometer that can be filled in as money is put aside for their goal.
As told by an accountant and a penny savers daughter: In middle school I took my first (and only) home economics class. We talked about checking accounts and how to save for everyday items through budgeting and saving. It was the only class that focused on any real-life examples and reasoning behind the importance of personal finance. Unfortunately, now a days that education curriculum is left to the parents. I remember talking with my dad and being excited about how I could be a millionaire by the time I’m 62 if I “only” saved like $2,000 a month. At the time I only knew the figures and didn’t know the reasoning as to how it worked. When I turned 18 my dad sat me down and told me that I had “Outgrown the Bank of Dad”. He would allow me to withdraw my whole balance of approximately $800 (thanks to various generous babysitting gigs and The Bank of Dad’s 10% interest rate) to start my own checking account with a big-name bank on one condition. I had to explain compounding interest, how it worked and why it was so important to save now. And I did. Like father like daughter I pulled up excel and put in the compounding interest equation, explained it to him and then showed what the ending balance would be of my account if I saved for 10, 15 and 30 years. To this day that lesson has stuck with me and it has to be the most beneficial personal finance lesson I have received. Teach your kiddos the power of time when it comes to saving for later because so many adults wished that they had started saving sooner.