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How to Teach Kids to Save: Six strategies for success.

in Managing Money & Credit, Youth & Student Finances
Child Savers

We all want what’s best for our children. Parents and educators instill knowledge, values, and skills into young people from an early age, teaching everything from basic life skills to academic knowledge to character development.

But what about finance skills? At its core, saving money is a fundamental habit that is crucial for achieving long-term stability and success. It provides essential building blocks for our children to experience financial security, achieve financial goals, reduce stress, and build wealth.

Financial Literacy for Children

Financial literacy refers to the knowledge and skills required to manage money effectively. It involves understanding concepts like budgeting, saving, investing, debt, and credit. Financially literate individuals can make informed decisions about money and manage their finances in a way that helps them achieve their goals.

Teaching kids about money and how to manage it is crucial in today’s world. By starting early, parents and educators can help children develop the skills and knowledge they need to make informed money decisions.

Being financially savvy allows kids to develop lifelong financial habits such as:

  • Understanding the value of money
  • Developing good spending habits
  • Investing basics
  • Avoiding major debt

75% of teenagers in America lack confidence in their personal finance knowledge. To this end, only 16.4% of high school students were required to take a class in personal finance.

Without the proper education and practice, children run the risk of mishandling money, acquiring unnecessary debt, and negatively impacting their financial futures. By starting education early, leading by example, using real-life examples, incorporating fun, and giving children autonomy and responsibility, parents and educators can feel confident that they have the essential tools needed to manage their finances.

Six Tips for Getting the Conversation Started

Before children can learn the value of saving money, they must first have a strong financial foundation. Use these six conversation starters to jumpstart their financial literacy!

  1. Broaden Their Understanding
  2. Be Vulnerable About Your Finances
  3. Teach Them about Values and Goals
  4. Introduce Them to the Real World
  5. Incorporate FUN
  6. Upgrade the Piggy Bank

1. Broaden Their Understanding

As adults, we comprehend the importance of money. But our children are often shielded from the responsibilities and concerns of earning and saving money. Before starting a conversation about the importance of saving money, we recommend educating your child on how money is earned and used.

First, start with the basics. Children need to understand that money is earned through income and isn’t always readily available. They may not understand and appreciate the hard work and effort that goes into earning money. This is a great time to talk about you and/or your spouse’s career and how you earn a paycheck for the hard work you put into your job.

Next, explain how goods and services cost money. Highlight your rent/mortgage, utilities, food, furniture, extracurricular activities, etc., and how these things are funded through hard work.

If appropriate, you can also share ways your child can potentially earn money so they can experience the satisfaction of diligent labor. Talk about entrepreneurial endeavors your child can engage in, such as selling toys they no longer play with, mowing the neighbor’s lawn, or pet sitting.

Grasping the concept of income and expenses will equip them to navigate the working and financial world.

2. Be Vulnerable About Your Finances

Talking about finances may be uncomfortable, even amongst our closest friends and family. But talking about finances openly and sharing real-life examples with your children from an early age can set the right tone for proper financial management.

After conveying how your income allows you to pay for things your family needs and wants, consider sharing your money mishaps and financial wins. Being vulnerable about your financial mistakes can show your child that it’s okay (and natural) to make mistakes.

Sharing lessons about debt, unwise purchases, or lack of savings can teach your child valuable lessons. Your vulnerability will also give them space to open up and ask questions, both now and in the future.

It’s equally important to share your financial wins! These can be motivating and inspiring to a young person. Share advancements you’ve made at work that have allowed you to increase your income, how you paid off a debt, saved for a car, built an emergency fund, etc.

Talking about finances openly and honestly can help your children develop a healthy relationship with money. If appropriate, share your financial pitfalls and wins, and even invite them to make budget decisions as a family.

3. Teach Them about Values and Goals

Along with providing for our everyday needs and wants, money can be used to help us achieve our goals and demonstrate our values.

Financial values are the beliefs and principles that guide our decisions regarding money. Examples include being frugal, living within your means, saving to avoid taking on debt, giving generously, etc. Sharing your values with your children can create a robust conversation and help them discover their own values.

Financial goals are the specific targets you set for your finances. You can share your savings, retirements, investment, and giving goals with your children and what you’re sacrificing to achieve them.

Encourage your children to demonstrate their values with the money that they receive and earn. Maybe they have a passion for the homeless community and want to donate 10% of their allowance to a local shelter or save up for an extra special experience instead of spending their money right away.

Wants versus Needs

Differentiating between needs and wants can be a difficult topic for some children to understand. They often struggle with delayed gratification and hear the adults in their lives use the term “need” inappropriately such as, “I need to stop for a latte.” It’s also a difficult concept to grasp because the adults in their lives take care of their true needs such as food, shelter, and clothing.

Using the terms appropriately in different contexts can help your child understand the difference between wants and needs. They need to eat a nutritious dinner to stay healthy, they want a brownie. Using these terms in other areas will help them appropriately translate them into their finances.

This is another opportune time to share your finances and how you distinguish between wants and needs in your life. For example, if your family needs a new car because your current one is on its last few miles, you can explain how you want a fancy sports car, but you’re going to buy a practical sedan instead because it provides for your need while staying within your budget.

4. Introduce Them to the Real World

Inviting your children into real-life financial situations and showing them potential financial opportunities is the best way for them to learn.


Teach your children the basics of building a budget through role-play! Make up a scenario for your child including a career, salary, and expenses, and walk them through how they would create a budget.

Start by explaining that a budget is a detailed plan for their money. As money is earned through hard work, it needs a solid plan for where it’s going to go.

Talk about their needs, such as housing (along with utility bills and maintenance), insurance, food, transportation, and clothing. Then move on to wants and the importance of living within your means so you don’t spend more than you make.


Their imaginary budget should include room for savings, including short-term goals such as a new car, and long-term goals, such as retirement and paying off a home. This exercise shows them the complexity of personal finance and how it takes forethought and planning to achieve success.


Invite them to shop with you and teach them the art of comparison shopping. For example, give them the weekly grocery ad and show them how to create a meal plan around the sale items.

Explain how much your family budgets for groceries and take that amount of money out in cash before you head to the store. Tell them they can only spend that amount. Allow them to practice their math skills and distinguish between wants and needs as you shop together.


The power of investing is too exciting not to share with your children! You can choose the level of complexity you want to share with your children, but at the very least, explain that investing is a way to make your money grow and that time is their biggest asset.

Using visual aids when explaining investing can be extremely helpful. Showing them how a small amount of money can potentially grow over time is a great way to motivate them to learn the power of investing. Consider opening an investment account just for them so they can see the power of compound interest from a young age.

5. Incorporate FUN

While adults may consider finances as stressful and complicated, children don’t have to view it that way! While they’re still young and protected financially by their parents, they have the luxury of learning valuable lessons while having fun.

Parents can utilize games that teach financial literacy concepts like Monopoly, The Game of Life, or Cashflow for Kids. When children are very young, you can play “grocery store” at home, allowing them to practice paying and making change with coins and bills.

Children can also learn by creating a budget for a family vacation or back-to-school shopping. They can even set mini financial goals for themselves with smaller rewards along the way.

Now is the time for them to learn, make mistakes, and grow their financial literacy before they become adults in the real world.

6. Upgrade the Piggy Bank

When children are young, a piggy bank provides a great visual for the concept of saving money. But as they grow, opening a youth savings account will allow them to protect their cash and grow their savings through dividends.

In the early stages of managing cash, either from allowances or a part-time job, a child can start learning how to manage a basic savings account. They can learn skills such as making a deposit, withdrawing money, and even making online payments. An early start will also allow them to start building a positive credit history.

For children aged 16 and older, consider opening a checking account. An account like A Lafayette Federal checking account allows teens and young adults to perform free mobile deposits, bank online, and earn dividends on their money, all without minimum balances or maintenance fees.

Engage Regularly

The best part about early money conversations with children is that it builds a strong relationship between the two of you. When you expose them to real-world experiences and allow them to make mistakes, you show the child in your life that you’re a safe place to discuss important topics.

Financial conversations shouldn’t be a one-time occurrence. As your children learn and grow, their finances will slowly become more complex and nuanced. They will discover their values, create goals, and learn to manage additional income and opportunities. By educating and encouraging them along the way, you are helping set them up for a lifetime of financial literacy and success.

Give Your Children a Head Start at Lafayette Federal

At Lafayette Federal Credit Union, we offer your family the tools, resources, and financial solutions you need to ensure your children get a head start on their financial roadmap. Getting them financially established is one of the best gifts you can provide to them. Set up an account in minutes to begin your financial journey today!

Not a Lafayette Federal member yet? You can become a member by completing an online membership application.

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