The Importance of Saving
You’ve probably heard the statistics – 63 percent of Americans can’t afford a $1,000 unexpected expense and overall household debt is up by 11 percent over the last decade. These stats don’t bode well for savings. They also are indicative of the future behavior of our nation’s children. If American adults aren’t making it a priority to save and pay off debt, how can they teach their children the importance of saving.
Needs versus Wants
While some adults may need a refresher, young children most likely don’t know the difference between a need and a want.
Need
A need is something that is crucial to survival; things you can’t live without. Examples of needs include:
- shelter
- clothing
- medical care
- nutritious food
- savings
Want
A want is something that is nice to have but not necessary for survival. Examples of wants include:
- electronics
- jewelry
- candy
- video games
- clothing (non-necessities like designer brands)
By teaching your children the difference between needs and wants, you’ll help them understand the importance of spending (and saving) their money wisely.
Tips to Help Your Kids Save
Showing your children how to save some of their allowance or birthday money at a young age will set the foundation for their future financial behaviors. There are numerous ways to incorporate saving in their lives.
- Lead by example –Â While you may be struggling in the savings department yourself, if you show your children you are actively trying to increase your savings, they will follow suit. Children are always watching, and your relationship with money and your spending habits may affect their outlook on finances.
- Say “no” –Â If you give your children whatever they ask for, they will never understand the value of a dollar. By giving them limits, it may open their eyes to the differences between needs and wants and making better choices.
- Give them both encouragement and tough love –Â Every time your child makes a deposit into his/her savings account, verbally praise them for doing so and encourage them to continue to do so in the future. At the same time, if they want to purchase something they can’t afford or purchase multiple small items (even though they said they were saving for one larger item), be sure to point out the issue, question their behavior and guide them down a more economical path.
- Set a savings goal –Â Motivate your kids to save by having them set a savings goal. If they know what they want to purchase, that’s even better. You can break down how much of their allowance they need to put away each week to reach their goal.
- Save first –Â Anytime your child receives money, encourage them to put a portion into their savings before spending any of it. By creating that savings habit now, it’s more likely to continue when they are adults.
Talking openly with your kids about money now will set the tone for their future. Managing and valuing money is an important lesson. If you have any questions about how to help your children save, call us at (402) 334-7000 or check out our kids accounts here.
