Saving Money: A Life Skill for Young and Old

This article was originally published on June 19, 2012 and expired on August 19, 2012. It is provided here for archival purposes and may contain dated information.

Summer is a wonderful time to help children learn life skills, such as managing money. Would you like your children to manage their money well as adults? How you handle your money and the opportunities you give your children to practice with money do make a difference.

First, remember that children learn about money from watching and modeling their parents. A study from Arizona Pathways for Life Success in University Students found that parents had the most influence over children in terms of developing positive financial attitudes and behaviors; significantly more than financial education or peers. In other words, the kids are watching you! What money messages are you passing along to your children? Take the time to talk to your children about your money values and let your children observe you doing money tasks such as paying bills. If you are saving money for future plans such as college or retirement, explain to your children that this is part of your budget.

We've all heard the saying, "practice makes perfect," and this applies to skills like money management. Do your children have an opportunity to earn money and then decide how to spend and/or save it? As parents, we can help provide these opportunities. Research by

Friedline and colleagues at the University of Pittsburgh has found that children who have their own savings accounts when young are likely to continue saving in later life.

Children can benefit from the experience of managing money at a younger age than you might think. In the article, "The Case for Extending Financial Inclusion in Children," the New American Foundation reports that children as young as five or six years old can recognize that saving is a good idea. And, they go on to report, that by age 12 children have the capabilities to use (and benefit) from having a savings account at a financial institution.

At around age 12 children use a savings account to help regulate their spending, and can understand the importance of saving money regularly in an account. At a younger age, it may be more useful to have children save their money in a piggy bank or clear container where they can see their savings add up.

The President's Advisory Council on Financial Capability is concerned with helping children become financially savvy consumers as adults, and has developed Money as You Grow. This new website outlines some of the financial concepts that children can learn at age-appropriate times. For example, a five year old can learn that "You may have to wait before you can buy something you want." And, by age 13 years, the money lesson can be "You should save at least a dime for every dollar you receive." On the Money as You Grow website (http://moneyasyougrow.org/) are suggested activities and resources for families. As you talk to your children about money, remember that children develop at their own pace and ages given for activities are intended as guidelines.

Giving your child an opportunity to save money towards something they want is a learning experience. Talking to your children is another important strategy. Sometimes a shared book can help provide an opportunity to talk. For example, "A Chair for My Mother," by Vera B. Williams is a wonderful, warm story about a family working together towards a shared financial goal. "Lunch Money" by Andrew Clements, is geared towards older elementary or middle school readers and features two enterprising youths. Many other excellent books exist; check at your local library for other book ideas.

Source: Kathy Sweedler, Extension Educator, Consumer Economics, sweedler@illinois.edu

Pull date: August 19, 2012