In Betty Smith’s poignant 1943 novel A Tree Grows in Brooklyn, a struggling, immigrant mother makes thrifty sacrifices in order to squirrel away coins in a tin can nailed to her closet floor. It is a powerful daily ritual that she believes will create opportunities to purchase something significant in the future. It is also a constant reminder of her hopes and dreams.
Saving has always been part of the American experience, and it is never too early to introduce children to the concept. In fact, discussing the importance of saving a little bit every day is a great way to introduce money management to kids, even at a very young age.
“Financial literacy starts at home,” says BSF President and CEO Carter Leak IV. “Kids can really grasp concepts about money and saving, and parents, grandparents or caregivers are their first and best teachers.”
Leak offers five key strategies to teaching young children to start saving:
Use a piggy bank
That tangible experience of hearing coins clink to the bottom of a piggy bank remains an exciting rite of passage for children because it’s the easiest way to demonstrate how money grows. Drop just one quarter a day in the pig for a year, and you’ll have $91.25. That is plenty for stashing away in a passbook savings account or for buying a dream toy.
Say you are at a store and your child wants a toy truck and a stuffed animal. Rather than buying both, discuss the importance of making a smart choice, and buy only one. Have your child save his or her own money to buy the other item. To keep the experience satisfying, rather than frustrating, make sure your child’s saving goal can be reached within a reasonable period of time.
Demonstrate compounded interest
As your child stashes coins and bills into a piggy bank, add a few of your own to the mix. Shark Tank’s Kevin O’Leary (click for a great video!) used this tactic when his children were young to illuminate compounded interest. Have them count their savings regularly. Your extra “interest” will demonstrate how money grows when it’s deposited or invested.
Save, spend and share
One way to make saving more interesting is to have kids classify what they save into three categories: saving, spending and sharing. It helps them see the varied uses for putting money away including long-term saving, purchasing, and donating to a favorite charity.
Discuss smart shopping at the grocery store
As a place where parents and children are often together, the supermarket is a terrific classroom for discussing the importance of saving money. Compare the cost of conventional versus organic produce, generic versus brand-named paper towels and the value of larger versus smaller sizes. You’ll have your child’s attention, especially when discussing foods they like to eat.