How to Teach Young Children to Save Money and Budget Allowances

The ability to handle personal finances by saving money and budgeting is a skill beneficial to most everyone. When children learn at an early age to save and spend money wisely, they are likely to do the same as adults. Here are ideas to help teach kids the skills of saving and budgeting money.

Give Young Children an Allowance
An easy way to begin teaching money saving skills to young children is to give them an allowance. You might want to base this on completion of some easy household chores. For young children, choose as small amount of money that they receive often, such as weekly.

Set Up Money Saving Containers
To help young children learn to save money, provide them with several savings containers, labeled with their savings goals. Small plastic jars work well. Try giving your kids their allowance in small denomination coins such as nickels and dimes, or even pennies, to make division between the savings jars easier.

Explain the Concept of Saving Money to Kids
Once your young child’s allowance is established, explain the concept of dividing up her or his money, allowing it to accumulate for savings goals. It works well to physically show children how this works with a handful of change and the labeled jars.

Help Young Children Choose Savings Categories
Once young kids understand how saving money works and how they can benefit, they are often eager to get started. Help your children choose a couple items or activities as savings goals, that aren’t too different.

You might also want to establish a mandatory category with a set amount of savings. For example, gifts for brothers or sisters, Sunday school offerings etc. Even a small percentage, maybe a nickel or dime out of each dollar of allowance can go a long ways in teaching values such as generosity and discipline.

Encourage Kids Money Saving Efforts
As young children are learning how to save and budget money, positive feedback for their successes is important. Stay involved with your child’s money saving efforts, even if you think the items or activity being saved for is trivial or worthless.

Reward Young Children’s Money Saving Efforts
Create money saving games to share with young kids to make the activity more fun for them. For instance, you might have one day a week in which you reward them with surprise small amounts of money for extra help they do on their own around the house. Or a money matching game in which you match their accumulated savings towards a more expensive goal.

Allow Young Kids to Blow Some of Their Allowances
Most of us like to spend some money impulsively at times. Young savers are likely to enjoy saving money more if they also spend some on unplanned activities and items. Allowing your kids the fun of blowing their allowances sometimes will help encourage them to save as well