Why Teaching Your Child to Save is the Greatest Gift You Can Give
A common stereotype is that Americans aren’t particularly great savers. You’ve probably heard of the oft-quoted survey that only 39% of Americans can cover a $1,000 emergency from their savings. However, when we take a more in-depth look at the data, and combine that with findings from other studies, a more optimistic picture emerges.
A recent survey by Bank of America revealed that 1 in 6 millennials have $100,000 or more in savings. Another survey by Discover showed that a higher percentage of millennials are saving compared to Gen Xers and Baby Boomers. This flies in the face of the perception that millennials are entitled and have poor financial habits.
One possible reason for this is that having come of age during a tough economic period, they better understand the importance of having disciplined financial habits. But understanding the importance of saving is one thing; actually cultivating and sticking with a savings habit is quite another.
So why is it that millennials are demonstrating better savings habits compared to their older counterparts? Simple: they start young.
Money Habits May Be Set as Young as Age Seven
A 2018 study conducted by psychologists from Purdue University concluded that money habits are set by age seven. You may debate whether this is true; after all, many people only become financially disciplined later in life. However, there is no question that the earlier you teach your children the value of a dollar, the easier it will be for them to stick with a savings habit well into adulthood.
So, what are some good ways to help instill a savings habit into your child? Here are three helpful tips.
Tip #1: Give Them an Allowance When They’re Young
Some parents might think that giving children an allowance at too young an age might encourage irresponsible spending habits. But how else can you teach children the value of money if they don’t learn how to handle it themselves from a young age?
Tip #2: Make Money Real for Them
We live in an increasingly digitized world. Many countries are already moving in the direction of a fully cashless society. This can make it hard for children to see money as something that is real and tangible.
A simple way to do this is through the tried-and-tested method of a savings jar. Set up a transparent jar somewhere visible, like the kitchen counter, and label it with the name of your child. Encourage your child to put the leftovers from his or her allowance into the jar: there is a powerful psychological effect in watching money literally pile up.
Tip #3: Make Them Work for Their Money
Teaching children the value of money by making them work for it, such as through household chores, is a time-honored tradition. While by itself it does not necessarily encourage a savings habit, by tying in the concept of money to hard work, children will understand that the ‘cost’ of using their money is that they’ll have to work even harder to compensate for their spending. You can also encourage more entrepreneurial habits, such as with the much-loved neighborhood lemonade stand.
Are you ready to teach your child smart saving habits? The Citadel Kids Club account is perfect for your family.Get Started
Savings and College Education: Start Young to Pay Your Own Way
Many college students work part-time to help finance their own college education, with one survey showing that 52% of college students work at least 27 weeks per year. Student loan debt has also reached an all-time high of $1.52 trillion, spread amongst almost 45 million people. And unlike other forms of debt, student loan debt cannot be discharged.
Therefore, it would make more sense for college students to finance their education as much as possible from their savings. Given the cost of higher education nowadays, this is no easy task. But what is clear that if you expect your children to contribute to their own college education, then they need to start saving early. That’s why teaching your child to save could be the greatest gift you can give.
Here at Citadel, we have a wide variety of savings accounts available to suit a wide range of needs and priorities. Consider our High Yield or certificate of deposits for long-term savings, and sign your children up for the Citadel Kids Club so they can get their own savings account and start learning about savings accounts first hand. As the saying goes, money doesn’t go on trees, and the sooner kids learn this fact for themselves, the better they’ll be at saving in the long term.