Money is complicated. For kids, it can be even more confusing. Parents often catch themselves in loops of saying “it’s too expensive” or “we don’t have the money” without providing a satisfying explanation that helps children understand difficult money concepts. Older generations worry that younger generations have no understanding of money. Parents complain that schools don’t include personal finance in the curriculum. It is difficult to incorporate money conversations into everyday life, especially with children still learning everything from tying their shoes to standing nicely in line.
A parent can introduce toddlers to the concepts of spending and saving with their first piggy bank, or for this game, piggy banks.
First, buy two piggy banks. One will be the spending bank and the other will be the saving bank (think of these as a checking account and savings account).
Next, glue the savings bank shut! No opening allowed!
The spending bank can be used for candy, toys or other things the child may want to buy. The savings bank remains unopened.
It is a simple concept that introduces the child to spending, saving and handling money. These banks provide children with a way to relate to money talk with their parents.
Added fun, more saving
- Name them: Give the piggy banks fun or cute names. “Feeding” them makes them happy! “Remember to feed Checkers!”
- Play along: Parents can play, too! They can play with their own piggy banks, their checking and savings accounts, or both.
- Match it: For a fun twist, parents can “match” any amount their child puts into the savings piggy bank. For example, if the child puts in a quarter, the parent puts in a quarter, too! Or just add a set amount every time your child puts money in the bank (for example, every time the child adds a coin, a parent may add a penny or a dime, no matter what type of coin the child puts in). Parents can choose to add to the saving bank, the spending bank or a combination of the two.
- Coupon chasing: Parents can include children in searching for coupons by “matching” found deals. If a child finds a $1.00 value coupon for something the household needs, the parent puts $1.00 in the child’s savings bank. Or, like mentioned in the previous idea, a parent can add a certain amount (say, a nickel or a quarter) for every useful coupon the child finds. This will also familiarize the child with the shopping and spending process.
- Mixing currencies: A parent may choose to make a currency rule, where different types of currency go in the spending or saving bank. For example, a parent may say that pennies and dimes go into savings, while nickels and quarters go into spending.
- First savings account: Once a child is a little older, a parent can take them to the bank and open their first savings account.
Including money talk outside of the piggy banks
Be sure to have money conversations even when away from the piggy banks and money handling. Grocery stores, restaurants and banks are excellent venues to speak with kids about money and show receipts. When online shopping, include the child to show breakdowns of item cost, shipping and handling, taxes and other fees.
When a parent is choosing not to buy something, they can say it out loud so the child understands. “Oh I would love to buy this nice shirt, but it is a lot of money. I guess I will wear the ones I have!”
Introduce responsibility and accountability outside of just money handling, for example, through household chores or homework. Be clear that not everything has a financial reward (for example, completing homework and doing dishes may be firm expectations with no compensation, while helping Grandma in the garden may be rewarded with money). Responsibility and good habits in other facets of life makes children more likely to succeed in saving.
Break the bank
When the saving bank is full, it is time for the fun part! Use a glue dissolving solvent to unseal the saving bank. Or, if a family is feeling feisty, bring out the hammer and open it the old-fashioned way! Count and roll the money with the child, then bring it to the bank to deposit into their savings account (we highly recommend rolling the change before bringing it to the bank, be kind to the tellers!).
A parent may choose to reward the child by allowing them to keep a certain amount of the saving bank for spending (for example, a set amount or percentage of the savings).
Start over and begin saving again. As the child grows up, piggy banks may be replaced by other containers, and eventually phased out for using actual checking and savings accounts exclusively. Rules can be adapted to adjust for a child growing into a teenager.
If this method of saving is used consistently and responsibly, by the time the child graduates high school and turns eighteen they will have a strong savings account to prepare them to move forward with their adult life.
How do you talk about money with your kids? What strategies work for you? Let us know in the comments below.