6 Tips for Teaching Kids to Save Money

5 minutes

We teach our kids to read. We teach them to write. We teach them how to be good citizens, be polite at the table, and be kind to others. But what about teaching kids to save money?

When it comes to learning how to save, the lessons can never start too early—not least because for better or worse, some habits that young people develop may stick with them for a lifetime. Luckily, figuring out how to teach your child to save money can be simple and fun.

As a general rule, families and educators can help set up kids to become financially savvy adults by teaching and reinforcing positive money habits at home and in school. Teachers can use free classroom tools like Stash101, a simulated banking and investing platform for K-12+, and families can sign up to receive more info on Stash101 At Home—coming soon!

Here are six additional tips for teaching kids to save money.

  1. Make a “piggy” bank

You don’t need to be a craft expert to make a fun object with a coin slot. Simply having a playful place to put those coins and spare change can encourage young kids to save. Get creative. Maybe a “kitty” bank or “puppy” bank will get your kid excited to stash savings away.

How to get started: Occasionally give your kids a small amount of spending money when you go out, and make it clear that what they have left is theirs to keep in their bank.

2. Teach them to wait it out

If your child has their heart set on some new gadget or toy, require a reasonable waiting period, like 1-2 days. This “cooling off” can reduce impulse purchases. If kids can’t remember what they wanted after a few days have passed, explain to them that it likely wouldn’t have been a valuable purchase anyway.

3. Award progress

Establish a savings goal for your child based on the amount of allowance they get, income from chores, occasional jobs like babysitting or shoveling a neighbor’s snow, and so on. Track their progress on a weekly basis and offer bonus money for good saving practices. For example, if your child earns or receives $10 a week, reward them with an extra $2 or $5 every time they are able to sock away $100.

4. Get kids excited about compound interest

Explain that there are benefits to saving money—including earning “free” money by way of compound interest from a savings account at a bank.

Lay the groundwork for understanding by telling kids that “interest” is a percentage of an amount of money that savings banks usually give their customers to reward them for storing money at their bank. Then talk through an example of compound interest and let kids know that basically, it’s interest that’s earned based on the money someone saves plus interest earned on previous interest. So for example, if kids saved $100 in a savings account at a bank, they might earn 5%—or $5—of interest after the first year, leaving them with a total of $105. After the second year, they’d earn another $5 on their initial $100 savings, plus 5% of the $5 they already earned in interest (or $.25), leaving them with a total of $110.25.

Ask your kids if that sounds like a lot of money. Kids will probably say no. Then let them know that a key part of compound interest is that it adds up over time—so even if no additional money were saved in that same savings account, after 10 years, they’d have more than $162—and after 30 years, they’d have more than $340!
This concept can be tricky for younger children to grasp, but older kids will certainly appreciate the idea of “free” money—and letting money earn money on itself over time.

5. Offer matching funds

Does your child want a guitar or skateboard? If possible, offer to match part or all of their savings to help them get to their savings goal. This is an easy way to demonstrate what it might be like if your child grows up to have a 401(k) retirement plan where their employer matches their contributions.

6. Set a good example

This one is harder said than done—but whenever possible, practice what you preach, and model saving-related behavior that you would like your kids to mirror. For example, think about how you spend your money and the messages you may be sending. No matter what your financial situation, it’s important to be mindful that your actions may influence how your child approaches money and saving now and in their future.

Janessa Boulay

Written by

Janessa Boulay

Janessa Boulay is the Director of Education at Stash101. She taught elementary and middle school students in Colorado before becoming an entrepreneur by starting her own software company, PayGrade, in her classroom. In June 2020, PayGrade joined forces with Stash and became Stash101, a free financial literacy platform that educates 100,000+ students around the country. Janessa loves bringing quality financial education to educators, schools, and organizations by creating content for Stash101 and presenting at conferences and on webinars. She truly believes financial literacy can transform students’ lives and empower them to build a brighter future.