How to Teach Kids to Learn to Save Money.


I don’t know that I would be a natural saver, planner, or budgeter if I had not seen what my parents did.  My  father would come home from work and empty his pockets and put his coins in coin banks.  My mother would make lists & never go shopping without a list.

My mother was the most influential.  My father turned over his paycheck to her, and she was responsible for bills and household expenses.  I am sure they were both on the same page when it came to  how to  plan for the future.  I knew that not all my mother’s friends were as savvy about money, because she opened ‘Christmas Club’ bank accounts with several of them. When I asked her why she had these (joint) accounts, she told me that ‘M’ would not save money every week if  it weren’t for the match my mom made.   I guess I am dating myself, as I don’t think any banks have that kind of account anymore. The idea was that you would open the account  two or three months before  Christmas, put money in once a week, then get a big check at the end.  The irony is that these accounts paid less interest than a regular passbook account.

Back then, in the  1960’s and ’70’s, some accounts paid simple interest, some paid compound interest.  It was known that ‘Savings & Loan Associations’ paid more interest on accounts than banks, and  nobody had heard of credit unions —except union members and farmers.  Certificates of Deposit were new products, and hardly anyone  knew what mutual funds were.  Instead, many people, like my father, trusted insurance agents and their products.  Funny, they were so opaque, but  it was your relationship  with your insurance agent that got you suckered in.

As a teenager, I really had no idea how much it cost to live.  My mother told me that  one week’s pay should cover  my rent and utilities for a month.  That was my ballpark.  I made an average of $20 a day grooming dogs, I am not kidding, Of course, my  share of the rent was $ 35 a month.  A can of tuna was 25c, and you paid for long distance phone service.

I didn’t get serious about saving until I  was entering my  thirties, and going to school and planning to travel.  Long story short, my first  house cost me $23,000, and I sold it  10 years later for $125,000 and bought the next house for $119,000.  This  kind of thing can be done again, with the ‘market correction’.  You just have to  decide what is a necessity.

These days, I try to pay for as much as I can with a credit card because mine gives me 3–5% cash back—which  sort of cuts the sales tax in Illinois.  I also have a record of what I spent at the end of the month.   I learned from my mother to pay off the balance at the end of the month, or  I’d be paying 10–25% more for everything with the fees.  That makes no sense. I am thinking of switching to a debit card, but that doesn’t give me cash back.

So…how do you teach kids to save?  By teaching them what  things cost, first.  Sort of like The Price is Right.  You can set up various packaged goods on a table  and have them guess.  Then, take them shopping and have them do comparisons of the various products.  Take them to different stores as well.  It’s important to teach kids that fresh food in season costs less than   prepared foods (canned or frozen, unless something is on sale or a loss leader).

When they ask for toys  or  luxuries, ask them what  it costs.  Ask them to compare costs or various brands.  Ask them how they plan to earn money, and give them ideas. My father had us separate a bucket of screws, nuts, and bolts into  about 20 different categories.    I think he paid us $1 an hour (minimum wage at the time was $1.60).  Kids can baby sit, do yard work, go shopping, do laundry, help  neighbors. I have also collected cans when I walk my dogs, Aluminum pays 40—50c a pound, Copper pays much more.

When I was in 8th grade, we had a section in a social studies class on  capitalism, and developing a business with a business plan.  Every school should have that, and if your school doesn’t, find out why.  A 10 year old can figure this out.

When I left home, at 18, I had no idea what anything cost, I just had the confidence that if I  shared the rent and household expenses, I would be ok.  I had a friend who had another friend who  moved out and back in to her parents home three times before she turned 26.  She didn’t want a roommate, and she was very fashion conscious.   I had a client who continued to live with her parents for several years after graduating from college. She worked as a trader  (with the internet, you can do a lot more than without).  She managed to save not only enough money to buy investment property, but also to return to school to get another degree. It just depends on your priorities.

What kick started me to economic security was  joining an investment club, and learning to do the research. Nobody ever got rich by saving.   Although I do own stock in a few companies, mostly I own  mutual funds. There is less risk and greater chance of reward. Still you have to know what your goals are and what kinds of investments meet your needs.  If you are going to pay someone else to mind your money, and have less than  $250,000,  you are really taking a risk and are going to pay a lot.  I remember when the concept of the Individual Retirement Account (IRA) was introduced in the early 1970s. Contributions were tax-deductible, but you had to keep the money in until you retired or there was a penalty.  I thought that was a great idea.  I had no idea that  Social Security would not be enough, but no matter.    It took me a while to get  with the program, but I  have 3 IRAs and  put as much in as I can.

The work I do, dog grooming, is very seasonal. That means in some parts of the year I am very busy and make a lot of money, but when the weather gets bad,  my wealthy clients leave town, and the rest make excuses.  I had to learn to save for those bad times.    I often do dog walking or over night pet sitting  in those lean times.

My checking account is  attached to a money market. That means it pays interest, but I have to keep a certain balance.  So, I put money in but it is not in the checkbook.  I see it on the statement, but it is not there to spend.  I divide my tips in three.   1/3 goes into savings, 1/3 is in the reserve, and 1/3 is to spend.  At the end of the month, if there is more than $100, it all goes into savings.  My guilty pleasures are  movies, dog shows, and going out to eat with friends.  Also, vacations, and most recently, books.  I live near a recycling center, and in Chicago there are a lot of church rummage sales and used bookstores. No need to pay for a book unless I really want it.  I consign books, clothes, and jewelry that I don’t intend to  use or keep.  I also donate a lot and keep very good records, as  I am self-employed and the tax write-off for ‘donations in kind’ is significant. I upped my  tax refund 40% by keeping track of donations-in-kind and using ‘client valuation’ guides—which you can find online.  I am not very fashion forward.  I buy clothes that are functional and durable, mostly at used clothing stores.  Several  of my male friends have disparaged  my  clothing, but since they are all in debt, I laugh them off.  Idiots.

So—- how can you teach a  child to save money?  Talk over all that I mentioned and encourage them to be curious and discerning.  Don’t pay for everything they want.    Don’t be judgemental if they make choices to spend money on stuff you wouldn’t.

For  more information on  financial education, check out  “RichnessofLife.org”  Great nonprofit doing financial education all over  the USA.

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