by Ann Marie Dwyer

Created on: March 01, 2009

Would you like to teach your child to build his very own nest egg? You can start securing your child's wise use of money by teaching savings and exercising his math skills.

Teaching money saving techniques to children may seem far removed from the parental focus, but failing to teach money value and saving early can lead to problems in early adulthood.

Elementary School

Many parents start giving allowances to children when they begin school. Some allowance conditions are attendance, chore and homework completion. While a six-year-old may not understand the value of a dollar, he completely understands the concept of something being "his".

When you give a child money, teach him to save a portion of it for later. This will become a habit, just like brushing his teeth. As he gets older, he will have better control over his money. Put the saved portion into a savings account to draw interest.

Exercise his newly learned addition and subtraction skills to advance his saving power. Offer incentives, like awarding ten dollars for every hundred he saves.

Keep the purse strings tight on the account. Leave his savings untouched to show him the value of interest and how saving money is as important as making money.

Middle School
By twelve, your child grasps the concept of spending money and may have mastered making money. Now is the perfect time to set savings goals. Whether you child is looking to spend on a car, sports trip or college, help him set attainable goals.

Middle school is the perfect time to add ten per cent of birthday and holiday money to the savings account. While this money is generally earmarked for "child's discretionary fund", teaching saving of gift money translates to future saving of tax refunds in early adulthood.

Put those multiplication tables to the test. Show him how a dividend is calculated. If in doubt, let your banker show him.

Freshman
Time for a budget. Give your child a finite amount you have allocated for back-to-school shopping. Let him calculate what has to be spent on essentials, like notebooks and pencils, and what is available to spend on clothes.

Explain how many pairs of pants and shoes he will need. Let him determine whether designer jeans are in the budget when he can get four pairs for the same price.

By explaining the power of budgeting, he may be able to save some of the back-to-school money for his savings account. This lesson will travel far when it comes to buying a car, a home and other large ticket items.

When teens learn budgeting, they learn to spend money in hand rather than using credit. This lesson will help your child keep his credit score clean.

High School
One out of every five American teenagers has a job. Open an individual retirement account (IRA) for him. If you can afford it, offer to match him dollar-for-dollar when he contributes to it.

If he needs convincing that retirement is not an eternity away, let a banker (or you can do it) show him how much $500 invested now will be at age 65 at eight per cent interest. Chances are he will jump at the prospect.

By teaching responsible savings and spending early, you child can have a healthy view of "a penny saved is a penny earned", a sizable nest egg and a clean credit slate.

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