What we’ll cover:
Kids grow up fast. That’s why it’s never too early to talk to them about the importance of saving. As a parent, there’s a lot you can teach your kids about money to help put them on a path toward financial wellness. Building healthy money habits and skills early is essential for fostering financial independence, discipline and smart financial decision-making.
In the broader scheme of things, you will also be helping your kids learn how to set goals and make plans to achieve those goals.
Let’s face it. Conversations about money are unavoidable when you’re raising kids. You can always count on them to ask for things – a toy, a car, or an all-expense paid night out with friends at the mall. Wait, do kids still go to malls?
Sure, you may indulge small requests here and there, but eventually you may find yourself telling them to get a job. At every turn in their young lives, there are plenty of opportunities to start a conversation about money and saving money.
Let’s look at six savings tips you can share with your kids.
1. Open a savings account. A piggy bank is good, but a savings account is better. With young children, consider taking them to a real bank once the piggy is full to open a savings account for them. This is a great way to reinforce the importance of saving early and saving often. Better yet, explore a high-yield savings account, which could earn even more interest. This is a great opportunity to teach your kids how money can grow faster with compound interest.
2. Explore other savings tools. A basic savings account is a great way to introduce your kids to the fundamentals of saving. When the time is right, you can broaden their horizons and introduce them to other important savings tools such as certificates of deposit (CDs) and No-Penalty CDs.
3. Make savings a habit. Make it a point to talk to your child about the importance of saving for both future goals (e.g., a new laptop) and unexpected expenses (e.g., bike repairs). Although kids may not have to worry about building an emergency fund right now – hey, you are their emergency fund – it doesn’t hurt to get them into the habit of saving at least 10% of their paychecks or allowance.
4. Save for retirement now. No, really. If your kid earns an income, she can contribute to a Roth IRA (read our Roth IRA for kids article). Plus, then you both can talk about the need to save for retirement while commiserating over your jobs and dreaming of early retirement.
5. Set goals. When it comes to saving money, it’s important to have both short-term and long-term savings goals. Help your kids set goals. What are they saving for? Whether it’s the latest smartphone or a car, work with them to figure out how much they would have to sock away each month to reach their goals by a certain date. Check out our Marcus Online Savings Account savings calculator to help them see that the more they save, the quicker they can achieve their goals.
6. Create a budget. Once your kids have some goals in place, this is a good time to talk about creating a savings plan or budget. Having a budget could help them work toward achieving long-term goals. Making a budget can also help your kids understand the difference between needs and wants. Earning your first paycheck is exciting. Teens might be tempted to spend freely given the sudden influx of cash. A budget can help them understand what types of expenses are absolutely necessary and stay focused on their savings goals. In short, a budget provides another chance for you to reinforce good savings habits and teach them about smart financial decision-making. Check out this article for some quick tips on how to make a budget.
Developing good savings habits isn’t a one-and-done deal. It takes constant reinforcement. And it’s not enough to just talk at your kids about good habits. It’s also important that you are (or at least try to be) a good role model for them. Share your own experiences and challenges when it comes to savings. Show them how you save for things like retirement, rainy day funds and family vacations.
By having these conversations early and often, you can give your kids a head start in building a solid foundation for future financial success.
This article is for informational purposes only and is not a substitute for individualized professional advice. Individuals should consult their own tax advisor for matters specific to their own taxes and nothing communicated to you herein should be considered tax advice. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of Goldman Sachs Bank USA, Goldman Sachs Group, Inc. or any of their affiliates, subsidiaries or division. Goldman Sachs Bank USA does not provide any financial, economic, legal, accounting, tax or other recommendation in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA or any its affiliates. Neither Goldman Sachs Bank USA nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.