Teaching Your Kids to Save

If your Odenton neighborhood is anything like mine, you have the local kids and their parents involved in fundraising for school and after-school activities.

I'm usually willing to give, considering that's part of my community responsibility that was drilled into my head by parents who did their very best to give their kids the opportunities they never had growing up during the Depression.  Think Boy Scouts, Little League, music lessons, football–you get the picture.

It's a "Pay It Forward" kind of thing, if you saw the movie of that title a number of years ago. But the latest request for a donation got me to thinking. How are kids today doing in terms of saving or earning money for their own activities department rather than just asking relatives, friends and neighbors for a handout, no matter how deserving?  

Well, folks that's not a popular question to ask. Notice there are no local quotes here.

Never deterred, I'm pressing on with advice to today's parents. Start early, for the schools and after school activities are not going to rise to the occasion of teaching your children how to save or make money. They will teach them how to ask for donations.

A few years ago, I represented the Financial Planning Association of Maryland on the Governor's Task Force on Financial Literacy. Good cause. Lots of meetings and interested parties, but little progress getting parents or school districts involved in programs to teach children the basic saving and making money skills necessary in today's world. Too many other issues like reading, writing and arithmetic.  Even the state legislature seemed to think it couldn't impose another program on the school systems. Punt back to parents.

Hey, I'm a parent and grandparent. What did I do, and what can I do now? 

For our two sons, we used the 50/50 system. Any money you make or receive as a gift you can spend half any way you want, but you have to save the other half for a long-term goal that was more than a year away when you started.  Our sons seemed to do ok, but later on the year deadline was hard to enforce for new goals. The proud news, our older son as an 18-year-old Eagle Scout, ended up one year with more savings than his dad. It was a bad year for real estate, but a good year for youth working part time jobs after school.

A few years after our kids departed for college and work, I came across an article about the Jars System. When a child earns or receives money you help them split it up into multiple jars; big jars, with labels like "immediate" " big goals" "college" and "charity".  Note to self: Be a good example and let your children see you save using a visible device or object , like a piggy bank, where they can observe your actions, which speak louder.

Parents and grandparents can also add a matching component to a child's saving program, like many companies do for their employees in the 401k plan.  I want to match my grandchildren's charity saving and will be communicating that idea by sending my two boys this column. 

Here are some more ideas I've gathered over the years:

1. Help your children set savings goals using pictures and thermometers to track progress.

2. Open a savings account at the credit union or bank where they don't charge for small youth accounts.

3. Bestow non-monetary rewards like a trip to the zoo or other special outings to recognize their saving or money making behavior.

4. Develop joint money making projects like the lemonade stand or dog walking service where you both do it together to start, and they can grow into doing it by themselves.

5. Take them to visit various charities to help children make a decision on where to give their charity money. We worked at the homeless shelter and gave them money too. These days the web has all sorts of videos on deserving charitable efforts.

6. Encourage your school to include life skills lessons like saving, banking and borrowing in their curriculum. Junior Achievement is a fine example. Google it, if you don't know what it is.

7.     Watch for programs on shows like Sesame Street that foster a child's understanding of concepts like money, saving and spending at an early age. It's available online now too.

Better yet, pay it forward by passing articles like this along to others as a thought for the day.  Your kids and grandkids and our community will be happy you did.

Jim Ludwick is the owner of Odenton-based MainStreet Financial Planning, Inc.  He can be reached by jim@adviceonly.net.