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Divide Savings Into Four Sections
Start teaching your kids about saving as soon as they have a regular income—i.e. an allowance. Help them understand that all the money they receive is not for spending immediately on candy, toys or games.
To help teach kids about all of the reasons to save, divide their savings into four sections. One section is for spending, one for saving, one for investing and one for donations.
Each time your child gets some money, whether from allowance, gifts or chores, have him or her put some of the money into each section. A common formula is at least 10 percent for savings, 10 percent for donations, 10 percent for investing and the rest for spending. Whatever formula you use, stick to it. Consistency creates a lifelong habit.
Dividing a child’s money into these categories helps to teach responsibility—to themselves, their loved ones, their future and their community. Let them know the importance of saving money for things like emergencies, common expenses (such as birthday gifts or lunch money), future purchases, investing and charity.
Learning Tip
Give your child an allowance paid in coins. Elementary aged students need lots of practice counting coins. If the allowance is a dollar, give it in four quarters one time, ten dimes another time, 20 nickels another. Then start to mix it up. How many different ways can dimes, nickels, pennies and quarters be combined to make a dollar?
