Most valuable financial lesson for kids
Teaching kids to save money and spend wisely can give them the power of choice in their financial lives.
Saving vs. spending: which is more important?
Some might say saving money is the more important financial concept to teach children, since it seems hard for so many of us to do. We wouldn’t be wrong…, but we’d be only half right. Most of our money, even for the best savers, goes toward fulfilling immediate needs and wants — on both essential expenses like food, healthcare and shelter, as well as on the nonessentials like nights out, gym membership and vacation. While teaching children to save money is very important, showing children how to spend wisely will give them more money to save.
Americans aren’t great at saving
We all know that saving money is important, but we don’t seem to stick to it. The facts are striking:
- As of August 2018, the U.S. personal savings rate is 6.6%, based on annual adjusted rates. This means that for every $100 they earn, people save $6.60 on average.1
- Almost 70% Americans have less than $1,000 in their savings accounts.2
- 4 in 10 adults would have to borrow money to cover an emergency expense.3
- One-quarter of non-retired people have no retirement or pension savings.4
- 66% of millennials haven’t saved anything for retirement.5
Share savings behaviors with kids
Remember, children are great imitators, so give them something great to imitate. Make sure your kids not only see you spend money, but also see you save, invest, or give to charity. Show them how these choices you make today can impact your tomorrow. Don’t chastise yourself if you’ve allowed some impulse buys to come before saving. It’s like being on a diet. Sometimes that chocolate sundae calls out to you, but you want to stick to your goal of losing a few pounds, so you don’t eat it. Maybe you budgeted in a cheat day. Explain this to the kids with applicable examples: if you buy your daughter the expensive prom dress she has her heart set on, you won’t have as much money to decorate her freshman dorm. Making these choices are a part of life, and showing how to be flexible is a gift you can give your kids. It’s a great lesson for them that the more money you have saved, the easier it is to manage priorities.
Choice is the most important lesson
Talk to your children about your financial goals and the things you want to save for: emergencies, college, retirement, a new car, and maybe that special family trip. Discuss your values and dreams and how you plan to make those dreams reality. Highlight how saving and spending can go hand-in-hand. The great part is that you get to choose what to do with your money. When your kids start to earn their own money, they’ll get to choose, too. The empowerment of choice is the most important money lesson you can impart.