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Once your kid has money, it’s important for him to learn how to save as well as spend. “For the under-five set, deposit a percentage —no less that 20 percent—of the money in a piggy bank as a short-term savings fund,” says Keehn. Help your child choose a savings goal for the money—a toy or book that she’ll be able to buy with about three months’ worth of savings. Skip the real bank, Keehn adds: Not only do kids that age actually need to see the money, but they don’t have the attention span to wait too long to achieve their savings goal. The rest of their cash should be fun money for them to spend as they wish on things like Mister Softee or Pokémon cards.
As your child gets older, around age ten or so, add another piggy bank for longer-term goals, like tickets to a concert or an iPod. “Make sure the goals are simple,” says Bodnar. “Don’t have them save for college, for example, as it’s so far away.” (You can think about saving for college though—see page 25 to learn more.)
Keep in mind that little ones have different personalities; don’t be dismayed if one child hoards her money, while her brother spends his the minute he hits his savings goal. “They’ll each learn to make their own money mistakes. Hands-on money management is the best way for children of all ages and income levels to learn,” says Bodnar.
As kids head into their teens, you can introduce the idea of saving for college and beyond. When Greenwich Village mom Nanette Burns started giving her daughter Nicole, now 16, an allowance at age 12, she also put a weekly deposit in a savings account for her. “We gave her $5 of fun money each week, but also matched that with $5 in her savings account.” When Nicole turned 15, her parents raised her allowance to $10 weekly with a $10 savings contribution.
There’s no guarantee that talking to your kids about money now will mean that their future financial savvy will fund your retirement. But if you lay the groundwork early on, they’ll have a better shot at making smart financial decisions in the years ahead. Or at the very least, maybe they won’t become famous for losing $7 billion.
