How to Raise a Saver

Here's the thing about saving: The earlier in life you begin, the better off you'll be. When we learn the basics of saving at a young age, these behaviors become instilled in us. Like brushing our teeth, or exercising, saving can become second nature.

Good savings habits early in life can contribute significantly to future financial success. Children who learn the basics of saving, budgeting, and delayed gratification often carry these skills into adulthood, potentially setting themselves up for greater financial stability.

Research also indicates that financial behaviors established in childhood can have long-lasting effects. A study by the University of Cambridge found that money habits are typically set by age seven, underscoring the potential impact of introducing financial concepts at a young age. Early exposure to saving concepts may lead to an improved understanding of delayed gratification, better budgeting skills in adulthood, increased financial confidence and independence, and a reduced likelihood of falling into debt. While these outcomes aren't guaranteed, they highlight the potential benefits of fostering a saving mindset from an early age.

With that in mind, here are some steps you can take today to help nurture a love of saving in your child.

Turn Saving Into a Game

Turning saving into an engaging activity can help maintain children's interest and enthusiasm. Gamification – applying game-design elements to non-game contexts – has shown promise in various educational fields, including financial literacy.

One approach to gamify saving is setting up savings challenges with specific goals and rewards. For example, children might be encouraged to save a certain amount each week, with a small prize or special privilege awarded when they reach their goal. Creating visual representations of savings progress, such as charts or savings jars, can also make the abstract concept of saving more concrete and exciting for children.

Family savings competitions can add an element of fun and friendly rivalry. Siblings or family members might compete to see who can save the most over a set period or who can come up with the most creative ways to save money. These methods can transform saving from a chore into an exciting challenge.

Use Technology to Teach the Value of Saving

Asking your child to save a portion of her allowance probably won't generate much initial enthusiasm. There are ways, however, to make this process much more engaging.

One example: You can use one of the many savings apps designed for kids on tablets and mobile devices. These apps can help children track their allowance - and any other money earned from household tasks - while also helping them set aside money each week to pursue long-term goals. Even better, many of these apps offer motivation and encouragement, and allow children to designate items they'd like to save for.

When selecting digital tools for financial education, it's important to consider the age-appropriateness of the content, security features to protect children's information, educational value, and alignment with financial literacy goals. Parents might also want to look for apps or programs that don't include in-app purchases or advertisements to avoid potential conflicts with the saving message.

It's also beneficial for parents to review and use these digital tools alongside their children, using them as springboards for deeper discussions about money management. This shared experience can reinforce learning and open up opportunities for real-world applications of financial concepts.

Real-World Savings Experiences

While digital tools can be valuable, hands-on experiences with physical money remain important. Practical, real-world activities can reinforce saving concepts and provide tangible experiences with money management.

One effective approach is helping children identify and pursue savings goals for desired items. This could involve researching the cost of a wanted toy or game, calculating how long it will take to save for it, and tracking progress over time. This process teaches patience, planning, and the satisfaction of working towards a goal.

Encouraging participation in household shopping can also provide valuable lessons. Children can help look for deals and discounts, compare prices, and understand the value of money in real-world contexts. Setting up a physical piggy bank or savings jar can provide a visual representation of money accumulation, making the concept of saving more concrete for younger children.

Understanding the Psychology of Saving

The act of saving money involves more than just putting coins in a piggy bank. It's intertwined with psychological concepts like delayed gratification, self-control, and long-term thinking. Understanding these underlying principles can help in nurturing a saving mindset in children.

The famous "marshmallow experiment" conducted by psychologist Walter Mischel in the 1960s demonstrated the importance of delayed gratification in children's future success. In this study, children who were able to resist eating a marshmallow in order to receive two marshmallows later showed better outcomes in various life measures as adults.

Similar principles apply to saving money. Children who learn to delay immediate gratification for future rewards may be better equipped to make sound financial decisions later in life. Parents can foster this skill by helping children set short-term and long-term savings goals, celebrating milestones along the way to reinforce the benefits of patience and persistence.

Tailoring Approaches for Different Age Groups

As children grow and develop, their understanding of money and saving evolves. Tailoring saving strategies to different age groups can enhance their effectiveness.

For younger children (ages 4-7), the concept of saving can be introduced through simple activities like sorting coins into different jars for spending, saving, and sharing. This age group benefits from concrete, visual representations of saving.

Pre-teens (ages 8-12) can start to grasp more complex financial concepts. They might be ready for discussions about opportunity cost – the idea that choosing to save for one thing means not being able to buy something else. This age group may also benefit from having a savings account at a bank, learning about interest, and setting longer-term savings goals.

Teenagers can handle more sophisticated saving strategies. They might be encouraged to save a percentage of their allowance or part-time job earnings, learn about different types of savings and investment accounts, and start thinking about long-term financial goals like saving for college or a car.

Addressing Common Challenges

Teaching children to save isn't always smooth sailing. Common challenges include maintaining motivation over time, dealing with peer pressure to spend, and balancing saving with other financial priorities.

To keep children motivated, consider breaking larger savings goals into smaller, more achievable milestones. Celebrate these milestones to maintain enthusiasm and reinforce positive saving behaviors.

Dealing with peer pressure to spend can be addressed through open discussions about advertising, consumerism, and the difference between needs and wants. Encouraging critical thinking about spending decisions can help children resist impulsive purchases.

The Takeaway

Instilling good savings habits in children is a critical first step in preparing them for later financial success. As children grow into adults, these habits can evolve into more complex financial behaviors like investing, retirement planning, and managing credit. The goal isn't to create perfect savers but to instill a balanced, thoughtful approach to money management that will serve children well throughout their lives.