Teaching Financial Literacy To Tweens: Saving For Short And Long-Term Goals

Sometimes we have to delay spending to save for larger purchases. This can be difficult for some younger kids who might be anxious to buy something now. Saving for short-term and long-term spending goals is an important money management skill and an excellent way for tweens to decide what purchases are really important to them.
 
While saving for short-term goals, such as a new CD, may take only a couple weeks, longer-term goals require dedication: it could take months or years of saving to have enough money for the purchase. You can help your child create a budget for the purchase and figure out:

• How much they have saved already
• How much the item will cost (including tax and shipping)
• How much money they expect to earn each week
• How long it will take to save 

Assume, for example, that your child wants to buy a new mountain bike so he or she can have fun riding with friends while being physically active. The bike costs $800, and he or she has $200 saved so far, and will need to save an additional $600 before purchasing the bike. Help your child create a budget that shows his or her starting balance ($200), expected income (in this example, from dog walking, pet sitting, yard work and two gifts), weekly totals and a running balance. You can use a spreadsheet program (see below) or pencil and paper. As the figure below shows, your child will have enough money to buy the bike after 17 weeks of earning money and saving.


Point out that in order for this particular budget to work, your child will have to avoid all other purchases during this 17-week time period; otherwise, it will take longer to save for the bike (which is okay … he or she just has to plan for it). If your child cannot get by without some spending money each week, make sure you build it into the budget. If you want to help him or her buy the bike, discuss what your contribution will be ahead of time so it can be worked into the budget. The important thing here is to make the budget and stick with it - it will be a valuable experience if your child can save for the entire 17 weeks without you "bailing" him or her out at week 10 and saying you’ll pay for the rest. It’s okay if you do contribute - just set it up ahead of time - by giving your child a certain amount of money, matching his or her savings by a specified percentage, or by offering to pay for extra jobs around the house (all of which should be built into the budget).