by Linda Haver

Created on: October 12, 2009   Last Updated: October 14, 2009

Teaching a child to save can benefit them all their lives. The lessons a person learns about money as a child will still be important as an adult. A parent who understand and models this concept will be more likely to raise children that value the importance of controlling their money so that their money does not control them.

Young children are extremely egocentric. They have little realization that there is a world beyond their personal experiences. They have no idea how much things cost or what is involved with earning money. When children are given everything they ask for, they are not learning to value what is important. Parents should set limits and verbalize to their children why they are or are not buying an object. Statements such as this is not worth that much money or this would be nice to have but it costs too much go along way to teach children that it is not practical for anyone to have everything they desire and that most people have limited funds to spend.

Before children can comprehend why it is important to save, they need to understand the value of money. Today's children have a limited concept of money. Part of the problem is they rarely see people using cash for transactions. Children can have a difficult time relating a plastic card to actual money. When children are old enough they should be paid a small allowance. This money can be placed in a piggy bank and counted periodically so children can see how the funds will grow when it is saved and not spent immediately. Many adults seem to think a credit card is the answer to all their financial problems. Children who have been taught the value of money are less likely to spend beyond their financial means.

Every child should have a savings account. When the piggy bank is full the money can be placed in their account. Other income a child may have, such as pay for extra chores around the house or birthday money, can also be deposited. When the bank statement comes each month and they see how much interest they earned, it is motivation to make more money from the bank by saving more. Children who have this experience will be more likely to become adults who budget their money so they can put money into savings.

Saving for a rainy day is a wise idea. Adults know there will be rainy days when unexpected expenses seem to crop up all at once. If children are taught the advantages of saving they will be more prepared as adults to meet the demands of a rainy day.

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