The golden financial rule when starting a family is to start a 529 College Savings plan as soon as your children are born. But what other tips are available to foster healthy saving practices for your family? Below are a few suggestions to foster fiscal responsibility in the next generation.
1. Teach about money transactions:
- Open a custodial savings account for your child and take them to the bank to deposit cash or checks they receive as gifts (such as that birthday money from grandma each year).
- Consider incorporating a monthly allowance to teach about spending and saving. Show children how to pay for items at the store. Show them the bill, receipts, and how tipping works.
- Go old school and encourage tweens and teenagers to earn money through babysitting, lawn mowing, snow shoveling, pet sitting, and other part-time jobs.
- Read children’s books and talk to your kids about money.
2. Practice how to keep a budget:
- Explain that when non-planned purchases are made, another purchase may have to wait so you can stay within budget. Help them see that money is not unlimited.
- If you are giving an allowance, practice split deposit. Set a percentage of their allowance to go into their savings account first, and the remainder can be their fun money.
- If they are not of age for an allowance, have fun with play and pay! Set up a game where your child completes an activity to receive payment for services, such as making and serving dinner. Pay them a fair wage and then help them choose what to spend their money on or encourage they save up for a toy.
- No more waiting for Santa. When your kids ask for a specific item, like when they desperately need that hot new game, ask them to contribute to the purchase, or pay for the item in whole, with their allowance.
- When your child enters middle school, track the money you spend buying their clothes and toiletries to calculate monthly expenses. Then, when your child enters high school give them a monthly allotment of money and explain that they will need to make purchase decisions for those same two categories.
- Tell them money not spent can be moved to their savings account or used for nonessential items the following month.
- Explain the account statement to them so they can see how deposits and earnings grow their account. You can also set up custodial accounts, so you receive alerts for their deposits and deductions.
- Set a savings goal. It may be something small like a certain toy, or more expensive like a new gaming console. Help them research the cost, set their goal, and track their progress. Celebrate the achievement when the goal is met in addition to purchasing the item.
3. Be a role model:
- Family Fundraising! Let’s say the goal is a family adventure to an amusement park. Even though you plan to pay the lion share of the goal, be transparent when deposits are made and celebrate. Shared ownership will foster a sense of accountability and achievement.
- Host an annual garage sale to clean out your home and earn a little extra money by selling unused or unwanted items. Allow your child to participate with their own table or some kind of food and beverage sale.
- Show them how to reduce spending. Work with your kids to grow items in the garden, fix simple things (like sewing up a rip in a favorite shirt), and build something together (like a clothes line to air dry clothes and reduce the electricity bill).
Take the mystery out of finances by incorporating financial literacy and these tips into regular family conversations.
Want More Saving Tips?
- Educate and Empowering Kids: Talking about money choices, big and small
- How much do I need to save to send my child to college?
- Get creative with low-cost family fun activities
Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2020 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved
Pensionmark® Financial Group, LLC (“Pensionmark”) is an investment adviser registered under the Investment Advisers Act of 1940. Pensionmark is affiliated through common ownership with Pensionmark Securities, LLC (member SIPC). Pensionmark Financial Group, LLC/Pensionmark Securities, LLC and Sequoia Consulting Group are non-affiliated entities.