Every year, one day in April—April 22—is designated as “Teach Children to Save Day,” a day that is all about helping kids become smart about money from an early age. But every day should be devoted to that if you have kids in your life. According to a 2020 T. Rowe Price survey, just 49% of adults rate themselves as “excellent” or “very good” when grading their knowledge of personal finance, making the financial literacy of the next generation even more urgent.

Saving money is a habit that can take time to build; some adults have yet to master it. Consider this: As of November 2020, 63% of Americans were living paycheck to paycheck, with no savings set aside to cover emergency expenses. This has been a particularly difficult year for many people to save. But all the same, to the extent that you can, it helps to go over the lessons that can help your kids learn the skill in good times and bad. With that in mind, here are 10 actions you can take to get your kids—and perhaps yourself—on the saving bandwagon.

Key Takeaways

  • Saving money is a habit that parents can teach their children at a young age.
  • The first step is to explain important concepts such as savings, a budget, and goals—then keep the conversation ongoing.
  • Giving children an allowance can teach them the value of money and, if chores are involved, hard work.
  • Younger children might keep their savings in a piggy bank, but older ones might want to keep their money in a real bank while working on their goals.
  • Children can learn the importance of living within their means, which is one of the basic tenets of saving.

1. Discuss Wants vs. Needs

The first step in teaching kids the value of saving is to help them distinguish between wants and needs. Explain that needs include the basics, such as food, shelter, basic clothing, healthcare, and education. Wants are all the extras—from movie tickets and candy to designer sneakers, a bicycle or the latest smartphone. You can use your own budget as an example to illustrate how wants must take a back seat to needs in terms of spending. 

2. Let Them Earn Their Own Money

Two-thirds of parents said they paid their children an allowance in 2019, according to a survey by the American Institute of Certified Public Accountants (AICPA), with kids earning $30 per week on average, based on five hours of chores. If you want your children to become savers, allowing them to earn and save money provides them with the opportunity to learn how to use it. When you offer allowances in exchange for chores, they’re also learning the value of their hard work.

3. Set Savings Goals

To a kid, being told to save—without explaining why—may seem pointless. Helping children define a savings goal can be a better way to get them motivated. If they know what it is they want to save for, help them break down their goals into manageable bites. If they want to buy a $50 video game, for example, and they get a $10 allowance each week, help them figure out how long it will take to reach that goal, based on their savings rate

4. Provide a Place to Save

Once your children have a savings goal in mind, they’ll need a place to stash their cash. For younger kids, this may be a piggy bank, but if they’re a little older, you may want to set them up with their own checking or savings account at a bank. That way they can see how their savings are adding up and how much progress they’re making toward their goal.

5. Have Them Track Spending

Part of being a better saver means knowing where your money is going. If your children get an allowance, having them write down their purchases each day and add them up at the end of the week can be an eye-opening experience. Encourage them to think about how they’re spending and how much faster they could reach their savings goal if they were to change their spending patterns.

6. Offer Savings Incentives

One of the reasons people save in their employer’s retirement plan is the company matching contribution. After all, who doesn’t like free money? If you’re having trouble motivating your kids to save, you can use that same principle to ramp up their efforts. If your child has set a big savings goal—for example, a $400 tablet—you could offer to match a percentage of what they have saved. As an alternative, you could offer a reward when your kid reaches a savings milestone, such as a $50 bonus for hitting the halfway mark.

7. Leave Room for Mistakes

Part of putting kids in control of their own money is letting them learn from their errors. It’s tempting to step in and steer kids away from a potentially costly mistake, but it may be better to use that mistake as a teachable moment. That way they’ll know in the future what not to do with their cash.

8. Act as Their Creditor

One of the basic tenets of saving is to not live beyond your means. If your child has something they want to buy and is being impatient about saving for it, becoming your kid’s creditor can help to teach a valuable lesson about saving. Say your child wants to purchase something that costs $100. You could “lend” the money and require payment from the allowance you provide, with interest. The lesson you want to teach is that saving may mean delaying gratification longer, but the item you want to buy will end up costing less if you wait.

9. Talk About Money

In the above-mentioned 2020 T. Rowe Price survey, 40% of parents said they'd never talked to their children about the stock market and 32% never discussed saving for retirement. If you want kids to learn about saving, it must be an ongoing discussion. Whether you schedule a regular weekly check-in to talk about money or make money chats part of your daily round, the key is to keep the conversation going. 

23%

The percentage of parents with no emergency savings, according to a 2020 T. Rowe Price survey

10. Set a Good Example

In the same T. Rowe Price survey, 23% of parents said they had zero savings for retirement, emergencies, college, or other financial goals. If you want your children to become savers, being one yourself can help. Getting your emergency fund in shape, opening a 529 savings account, or simply increasing your 401(k) plan contributions are all steps that you can take to encourage saving as a family activity. You could also decide to save for something together, such as a big-screen TV, a family vacation, or a pool.

The Bottom Line

Teach Children to Save Day only comes once a year, but there are lessons to be learned, for parents and kids alike, all year long. If you’re a parent, making saving a regular part of your child’s routine can lay the foundation for a bright financial future. The tips outlined here are a good place to start.