Raising Kids Who Save

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Other Money Lessons

Kids of all ages can learn about the value of saving and careful spending.

  • Impulse Buying: "If they buy something on a whim, they may realize a couple of weeks later that if they had saved, they could have gotten something they wanted more," says Linda Homsey, a certified financial planner with Freya Financial Services based in Winchester, Massachusetts. Kids are kids, and they should enjoy the instant gratification of spending cold hard cash. But as they get into their teen years, they should have longer-range goals.
  • Don't Make It Too Easy: If you give an allowance that's too big, your child will be able to get everything he wants whenever he wants, without ever having to save, or think of the future, or ask for opportunities to earn money doing chores around the house. "If the goal is to buy a $200 PlayStation, you don't want to give $50 a week so they can get it in four weeks," says Pomerantz. "Maybe give $15 or $20 for a teen. It should be enough that they can spend some now and put some away for a long-term goal."
  • College Planning: Many parents feel strongly that their kids should contribute to the cost of their college education. You can encourage savings by setting up "pots" of money with your child. Of their allowance, a certain percentage can go into one pot for short-term spending and another percentage can go to a college pot.
  • Offer Incentives: You can offer incentives in the form of a matching contribution. Just as your employer may offer matching funds for your retirement savings plan, you can offer 25 cents or 50 cents for every dollar your teen saves towards college. Even if you want to be the one to pay for college, teens can save for related expenses, says Homsey. "At least earning their spending money is important," Homsey says. "They have a better feeling about themselves when they do contribute, even if it's just spending money for spring break."



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