Do you remember the joy of opening a full piggy bank? Do your children understand the value of a dollar? Teach Children to Save Day, observed this year on Tuesday, April 21, is an annual event highlighting the importance of teaching our nation's youth about preparing financially for the future. Adults can do their part by talking to children and visiting classrooms to share savings lessons.
Learning how to manage money early is a lesson that will be essential throughout children’s lives, according to the Virginia Society of Certified Public Accountants (VSCPA). Here are some tips from CPAs that you can use to ensure even the youngest children learn how to save and spend wisely.
Give them responsibility
Most children begin to learn about money through their allowances. When you give your children a regular allowance and let them make decisions on how to spend it, you’re providing them with an opportunity to budget and take responsibility for their own expenses. Each child will be ready for an allowance at a different age, but 5 or 6 is often a good time to start.
An allowance is a great introduction to how money works in the real world. Your children may not always make the right decisions, but they will learn from their mistakes now rather than when they are adults.
Discuss allowance options
There are many ways an allowance can work. Some parents pay one amount every week, while other children receive money in exchange for certain chores or accomplishments. Some families require children to save some part of their allowance, while others leave this decision up to the child.
You should explain to your children what they are expected to pay for with the allowance. It may be meant to cover splurge items, such as new toys or pizza after school with friends, or you might ask them to chip in on other expenditures, such as equipment they will need for a sports team. On all of these questions, there is no one correct answer, so you can pick the approach that’s right for your family.
Whether you require your children to save some part of their allowance or not, it’s a good idea to open savings accounts for them and suggest that they set a small amount aside whenever they receive it, including birthday gifts or money they earn from summer jobs. Of course, savings aren’t meaningful without a goal. When your child is dreaming of an expensive electronic gadget or some other pricey item, explain that he or she can have it — when there’s enough cash in the savings account to buy it. This will teach your children the value of saving, as well as an appreciation of money and the things it can buy.
Virginia CPAs launched the Financial Fitness program to help improve the financial health of Virginians of all ages. Visit FinancialFitness.org for articles, tools, and tips on a variety of financial topics designed to keep your family on track and help you build a sound financial future. Have more questions about your family’s financial situation? Your local CPA can help. Turn to your CPA for advice on introducing financial issues to your children and on the best ways to manage your money.