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How To Help Your Kid Save Money
Saving money can be difficult for kids and teens. Fortunately, there are ways parents can help, beyond providing an allowance. Let's look at plan centered around financial literacy and goal setting.
Before your child starts earning money is the time to talk about financial literacy and money management. Head to the bookstore together to browse age-appropriate financial books, or check out those featured here. Not only will this serve as much-needed bonding time, but it can also open lines of communication about finances.
- Set a Goal
- Make it measurable
- Set a deadline
- Develop a plan to reach your goal
- Celebrate milestones
Money Saving Books For Teens
Set Measurable Savings Goals
The most important thing you can do is to set a goal. Talk with your child about what financial goal they want to accomplish. Perhaps it's buying a car, perhaps it donating to charity. Once they have a basic idea of what what want to do, it's time to talk specifics. A goal must be measurable and have a defined time. For example, saving $5,000 in 1 year.
After you have the larger goal in mind, break it down into smaller chunks. Let's take our goal of $5,000 in one year. Break that down into monthly goals of $416.67. Or, you can break that down into even smaller goals of $96.15 per week for 52 weeks.
Once you have a goal in mind, work out a plan on how to achieve this desired amount by a target date. What would it take to earn $96.15 per week? If your kid is walking dogs, for example, decide how many dogs he would need to walk each week to earn $96.15. Let's assume he earns $5 per dog. He would have to average just over 19 dogs per week to reach his goal ($96.15 / $5 = 19.23 dogs). Is that feasible? If so great. If not, talk about what he can do differently. Charge more per dog? Walk more dogs at once? Brainstorm ways that he can meet his weekly goals. Knowing exactly what it will take to achieve his weekly goals means that he knows exactly what it will take to earn his overall goal.
Financial Literacy Kits
When Did You Start Earning Money
Having a goal is critical, but staying motivated to achieve that goal is also important. Set incremental milestones to keep your kid motivated. Consider heading to the art store for a few supplies and be creative. For example, you could create a poster with a picture of a vehicle. Divide the amount of money needed to save by 10. Now divide the picture of the vehicle into 10 sections. Each time your child saves 10% of the goal amount, color in one block on the picture of the car. Hang the poster in a visible place, like the fridge. This will serve as reminder of how much is left to go and will also provide encouragement to continue working towards the ultimate goal.
Provide your child plenty of encouragement as he works towards his goal. Learning how to set and accomplish goals is such an important skill for everyone, parent and child alike, to learn. Perhaps a small celebratory lunch or dinner would be appropriate when your child reaches the 50% and 75% milestones.
Set Up a Roth IRA With Your Savings
Now that your child is earning and saving money, talk to them about setting up an Roth IRA. Anyone with compensation can contribute, including minors. And, your children have the best advantage on their side - time.
Best of luck on your money saving goals.