With the current economic crisis, many kids wonder how to save money at a young age. They realize that their parents might not be able to support all of their financial goals, and are curious about how they can support themselves. Indeed, teaching kids to save money, as well as the principles of frugal living will eventually lead to self-sufficiency and economic independence. Here are some ideas about how to save money at a young age.
How to Save Money at a Young Age
Kids should start a savings plan as soon as they receive their allowances. The first step is to devise some savings goals. Some should be long term, others will be short term. Examples of short-term goals include:
- A coveted toy
- A bicycle
- A pair of skis or a snowboard
- Ski or Snowboard Boots
- A baseball glove or bat
- A prom dress
- A bottle of cologne
- A CD player
Now, let's talk about long-term goals. These might include:
- College, including application fees and visits to different schools
- A trip overseas
- A spring break trip to a resort
- A home
- A wedding
- A computer
- Starting a business
- A car
Opening a Savings Account
Next, your kids will need to open up a savings account. They should arrange to put 33 percent of their allowances into this account. If their long-term goals are ambitious, they might want to consider a long-term certificate of deposit, or CD. That way, they won't be tempted to prematurely withdraw the money. Consider using a credit union instead of a bank. The fees are cheaper, and you will have to be with your child if he or she wants to withdraw their savings. Again, it makes it more difficult to withdraw.
How to Earn Money as a Young Teen
Particularly lofty goals might require a supplemental income. Fortunately, there are a number of ways that this can be earned. Here are just a few:
- Newspaper delivery
- Summer camp counselor
- Dog walker
- Mowing lawns
- Selling products such as Avon or Mary Kay
- Shoveling snow
- Passing out flyers
- Kids over 16 can apply for jobs at fast food and retail stores
- Younger kids can sell lemonade or baked goods
Here's another idea. Your kids might be able to sell their once-coveted toys, athletic gear, toys and computers. If they are working enough hours to earn taxable income, they can donate items to charity and earn tax credits.
Inspiring Your Kids to Save Money
Let's face it. For many kids, the concept of saving money is somewhat abstract. Kids live in the here and now. Sometimes, to get them to be future-oriented, you might need to show them the money.
Sit down with your kids and construct a savings chart, and show them how much they might make in a given number of years, and at a variety of different interest rates.
It also helps to set an example. Explain the many ways that your family saves money. If they are old enough, talk about the difference between stocks, bonds, CDs and other types of investments.
Teaching Your Kids How to Live on a Budget
In order to have money left over for a savings account, your kids should learn the principles of living on a budget. For example, many kids do not realize that in most cases, generic brands are just as good, if not better, than commercial brands. Many items can also be bought on eBay. Even if you would prefer to have them avoid the auctioning process, many things can be bought as a "But Know" product.
The ability to budget and learn how to save money at a young age is a sign of maturity. Don't let your kids miss this important transition point!