7 tips for teaching kids to save money

You probably know it’s important to teach kids to save money, but that doesn’t mean it’s easy. Some knowledge about how kids approach money may make the conversation easier.

1

Kids have trouble imagining the far-off future

It’s a good idea to start with short-term savings goals: The more distant or abstract the goal, the harder it is for kids to visualize it. Encourage them to work toward something tangible they’d like to have soon, like spending money for a family vacation or a coveted accessory.

2

Tweens and teens may have trouble distinguishing between needs and wants

Most adults know there are expenses you have to pay (your needs) and there’s discretionary stuff (your wants). Kids may have a tougher time making decisions about spending trade-offs. You can explain that school supplies and a soccer uniform are needs, and movie tickets and designer jeans are wants. When pressed for cash, tweens and teens may need to be told it’s useful to prioritize their necessities so they’re never stuck without something essential.

3

Kids may not realize a budget can apply to them too

A great way to help middle and high schoolers understand responsible spending and saving is to create a budget. Encourage your kids to record all their monthly earnings and expenses in a journal. In addition to recording what they bought and how much it cost, ask them to write down why they decided to make the purchase.

4

Tweens’ and teens’ budget frameworks can look a lot like yours

When building a family budget, many parents look at three main categories: income, necessary expenses and discretionary expenses. While you undoubtedly have more complex finances than your tweens or teens, that basic system could apply to them too and help you to share some budgeting tips for kids.

Income for middle and high school-age kids probably comes from part-time jobs, allowances, and birthday or holiday gifts. Necessary expenses might include data for cell phones, or gas and car insurance. Discretionary spending includes things like movie tickets, outings with friends and digital downloads.

5

Yes, they’re going to ask for money

It’s normal for teens to run out of money occasionally (about 30 percent ask for an advance on their allowance), and it may be tempting to give in. You might know they’re really trying, and even adults struggle with budgets. But most experts agree that if you give children more cash, they aren’t learning the lesson of living within their means. So consider whether it’s better that your children start to understand this skill when young—rather than once they’re on their own and the stakes are higher.

6

For older kids, branch out beyond the piggy bank

While piggy banks are fine places to keep spending money and savings for short-term goals, parents may want to consider opening savings accounts with their tweens or teens. You can explain that in addition to helping protect their money, a bank account offers a way to build their savings with interest. Watching the account grow can help drive home the point.

7

Teenagers are ready to think about trade-offs

Older teens may start to realize that it takes effort to save for longer-term goals. Indeed, 59 percent of high school seniors are willing to give up a car or electronics to help pay for college, according to a survey from the College Savings Foundation. Talking to your kids early about how much college costs can help them make tough decisions on spending and saving.

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.

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