Economy and Kids!

Children and Savings

Learning to save money is just as important as learning to spend money wisely. Teach children to save some of the money they receive from allowances, chores, gifts, or work. You might, for example, have them put some of their money into savings and donate some to charity, then allow them to spend the rest. Very young children can save money in a piggy bank, but as soon as children are old enough, take them to the bank to set up a savings account. Not every financial institution is kid-friendly; don’t automatically head to your regular bank. Ask a bank representative the following questions:

• Does your bank prepare information targeted to the youth audience?
• Are there lower minimum deposits for children?
• Are fees waived for children?
• How often is interest paid to the account?

Interest payments are an important benefit of a savings program. Teach your child that the money saved is busy earning interest. For very young children, use two containers and a little change to teach them about interest. Mark one container “S” for savings and the other “I” for interest. When a child puts a quarter in one jar (the savings jar), you put a nickel in the other jar (the interest jar). While this is a generous 20 percent rate of return, young children will probably miss the exaggeration. They will understand, however, that money can work for them, and they’ll be inspired to participate in a savings program. For older children, you can use real-world examples. For example, as deposits are made into a savings account, show your child how interest is being earned not only on the deposits — the principal — but also on the interest previously earned.