Teaching kids about money and saving....

When I was a kid, I remember my parents teaching me about money and the value of saving. But I also remember that they did more than just "tell me" what to do...they would walk the talk as well.

My parents were not wealthy....and they started life from very humble beginnings. My mother had a high school education, and my father finished college in his mid-thirties.

Both of them had to work to make ends meet, but they were always happy and never in debt. They kept telling me that the key to it all was being frugal and having a mind to save!

So when my wife Cheryl and I had kids, we talked a lot about what we wanted to teach them...and how we would also try to practice what we preach. (I hope we are at least a little successful)

We wanted to give our daughters an appreciation for how saving could be done, so we decided to start by giving them an incentive to save. It all started with their receiving an allowance for doing their chores. We tried to connect the chores with the allowance, though I don't think we ever held it back if chores were not all completed. (they sort of worked on salary I guess...but they did their chores)

But how to teach saving....well, I thought that I would introduce them to the idea of making interest in money saved. But kids have a short attention span....they were not going to see the value of earning 10% per year....so I raised the ante and offered them 10% a month! (and I rounded up to the closest dollar)

We would get together at the end of each month, look in their saving box and I would pay them the interest right on the spot. It started out giving them a buck or two, but when they saw it growing, they naturally started holding the money. They quickly saw that they could actually make more in interest payments than in allowance....and if they were patient enough, they would be buying candy with interest alone with no need to touch the new allowance or principle!

Soon after that, they noticed that their saving would allow them to have enough to buy some pretty cool things they wanted. Kristen actually bought Elijah (her dog) for $600 at one point!

What did I do when their savings level hit $500 and I was giving out $50 a month....I kept it up because I saw it was working and they were really thinking about whether they wanted to "blow" money on something or save it. (besides, if I quit, they certainly would have had an incentive to just spend it)

I think they both ended up with about $1000 in savings each, and this was what they used to open up their bank account that they have to this day.

I guess the lesson I myself learned is two fold.....first, if you want to teach your kids something, you have to be proactive and do it. You can't expect them to somehow "pick it up" along the way. (It's the parents responsibility)

Second, once we started, we had to keep it up, and more importantly....we had to ourselves be consistent......to live by example ourselves. So Cheryl and I always tried to save, and to include out girls in on that thought.

So far, both of our girls have turned out to be very good with money, and very frugal as well. I believe it was at least in part due to our little lessons along the way.