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Teaching to Save…and Spend

Although teaching your child to save is important, teaching them to spend is just as valuable a lesson. According to Money Doesn’t Grow On Trees by Neale Godfrey, the average American saves between four and six percent of their annual salary. That leaves roughly 65% after taxes to cover living expenses. Carefully managing these two elements are equally important.

To begin, make sure you have the proper tools in place – piggy banks and savings accounts are great places to start. Think of how you would teach them to ride a bike. Without the bike and a helmet, they wouldn’t be very prepared to learn! With the right tools and your guidance, you can help your child build safe money habits that they’ll never forget. And like riding a bike, make sure to emphasis the rewards of savings, so that there’s fun involved too. After all, there’s nothing more satisfying than buying something you’ve been saving for.

Along with providing a place to save, another tool to equip them with is a source of money to learn with. For younger kids, this can be in the form of an allowance or birthday money. As they get older, this should be supplemented by money earned for doing chores or income from a part-time job.

In addition to savings and spending, there is one more way to allocate money – donating. Consider including this third element into your discussion on where money goes and encourage your child to give a small portion of their savings to a charity of their choice. Your child may find it fun to help other kids get presents around the holidays or buy a teddy bear for a terminally ill child (similar to the The Aerospace Corporation holiday program). This is a good way to teach them that they can make a big difference, even while they’re young.

The final element is making sure you stay involved. Help them set goals and monitor their progress. Reward them when they accomplish their goals. Remember, saving is a habit, so you should practice setting and achieving goals on a regular basis.