Instilling the Values of Savings and Wise Money Management in Our Children
by Matthew Peterson
Few experiences in life cause a person to stop and reflect on their values the way the birth of a first child does. A new parent takes on the challenge and responsibility of not only continuing to work through and live out their own values, but of now passing those values on to a child. This daunting, humbling, and wonderful responsibility began for my wife and me three weeks ago with the birth of our daughter Neva.
Of the many values that a parent passes on to a child, one that is sometimes forgotten is the responsibility of teaching our children about money. During a recent conversation with my wife, I was struck by how much each of our values concerning money are products of our upbringings. Years since leaving home, I continue to be influenced by the ways my parents taught me to manage money and the examples I saw of them managing their own money. As I prepare to begin teaching my own child about the value of savings and wise money management, I have tried to consider lessons I gained from own experience growing up.
The Money Jar
For many children, including myself, one of their first experiences with money is collecting change in jars. Watching a jar fill with shiny coins gave me a taste of the pleasure saving money can be and I remember how fervently I took to searching around my house and under couch cushions for spare change to fill it with.
In addition to helping a child learn to identify money, a money jar can help a child begin to understand that things cost money by letting them make purchases with their saved change.
A Child’s First Savings Account
When I became older, I moved my savings from a money jar to my first savings account at our local bank. In addition to learning where money is kept and about the concepts of deposits and withdrawals, this was also my first introduction to interest. I remember thinking as a child what a great deal this was for me. Not only did the bank hold and protect my money, but they actually paid me to do this. Even though the interest I earned was minimal, I saw what seemed to be “free” money added into my account each month and began to learn early the value of making interest work for me.
A savings account for a child can help teach a number of other important lessons. By talking to a child about what they are saving for, a parent is helping to teach their child about the process of setting and reaching financial goals. Like adults, when a child knows specifically what they are saving for they become more determined and more likely to meet that goal. Furthermore, without a goal, a child can also become discouraged if they are forced to save without ever seeing the benefits of that savings. Finally, a savings goal can help teach the value of delaying gratification by showing the satisfaction that comes when a child is finally able to reach their goal and make their purchase.
Luckily, there are many low-fee or no-fee “starter” savings accounts available through DC Saves that can be your child’s first account. Check out www.dcsaves.org/enroll/products.asp for the list.
The Allowance
When I was in high school I received an allowance—an amount of money which I could use for whatever I wanted, but it also had to cover certain necessities, like my clothing. Receiving an allowance forced me to budget money for the first time. I could choose how I used my money, but once it was gone it was gone and that forced me to look at the difference between wants, needs, and wishes. While my parents offered guidance, they were careful to let me make my own decisions. They believed it was important for me to have this because bad decisions, like spending a month’s allowance just to have a brand name piece of clothing, are often the most valuable for a young adult learning to manage money.
These are just a few of the ways that a parent can help teach their child about savings and managing money. You can find more information and ideas at http://life.familyeducation.com/money-and-kids/personal-finance/34481.html
Last week, Neva received her first check for $50 from her great-grandmother. I will be putting that check into a high interest bearing savings account for her and hoping by the time she knows what it is, my wife and I will have been able to help her understand how to use it wisely.
This regular financial column is presented by Capital Area Asset Builders (CAAB), www.caab.org, a nonprofit organization that helps people of all incomes to improve their financial management skills, increase their savings, and build wealth. Call us at 202-419-1440 for more information. Send feedback on this column and your ideas for future topics to saving@caab.org.
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