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Family Finances: Teaching Kids How to Save Money

George Grombacher April 13, 2022

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Family Finances: Teaching Kids How to Save Money

Successfully managing family finances and teaching your kids how to save money is one of the most fundamental and important things you can do. 


I can’t overstate the importance of what I’m going to talk about today; if your child is able to adopt these skills it will lead to success in many areas of life. If they can’t, they’ll probably struggle. 


Personal finance is overly and unnecessarily complex and full of jargon. Here’s the key learning for today; spend less than you make, and save money. Sounds easy, does hard. 


Don’t believe me? Two thirds of Americans live paycheck-to-paycheck. That means they’re not currently spending less than they make and not saving money.


Making matters worse, the average American has more than $6,200 in credit card debt. 


What’s to be done? How can these people break free of this vicious cycle? They need to make a choice. 

Jim Rohn famously said, “We must all suffer from one of two pains: the pain of discipline or the pain of regret. The difference is discipline weighs ounces while regret weighs tons.” 


Pay now, or pay later. For those folks living paycheck-to-paycheck, they’re making the decision to pay later. They need to change their behaviors and start paying today instead. 


What are you doing? Are you in the broke 2/3rds, or the 1/3rd that’s living prudently within your means and saving money? Where will your kids be? 


As someone who spent the better part of my 20s living paycheck-to-paycheck, I want my kids to skip that step and get started on the right foot. 


Here’s what we’ll cover:


  • Delaying gratification

  • Short-term savings

  • Mid-term savings

  • Long-term savings

  • How to do it


Let’s get started.


Delaying gratification


This is really what we’re talking about. Are you able to delay gratification? Are you able to make sacrifices today for a better future? If you’re able to, you set yourself up for success not only financially, but in nearly every aspect of life. 


My grandfather grew up on a farm in South Dakota during the Great Depression. During the summer, they chopped wood everyday. They didn’t do it because they were sitting around a fire every night, they did it because they’d burn it for heat during the winter. 


My grandparents were prolific savers who became financially independent. They were always in a position to help their family when they needed it. 


When animals are preparing to hibernate for the winter, they’ll put on extra fat or bury nuts and acorns. They prepare for the future. 


To be financially successful, you can’t spend every dollar you earn. You need to keep an eye on the future, understanding you’ll need money in three weeks, three years, and thirty years. 


Short-term savings


Understanding time horizon is an important part of personal financial success. I think of short-term as zero to three years. Mid-term as four to 10, and long-term and 10+. Commonly, our short-term priorities are building our emergency fund, paying off debt and annual vacations. Mid-term objectives are the down payment for a house and kid’s education. Long-term is retirement. 


To create financial security, we need to have a healthy emergency fund. My recommendation is to start with $1,000. This is enough to cover most minor emergencies like car trouble. From there, get one month’s worth of expenses saved. Then two, then three, then four, then five, then six. 


Too much? Not enough? 


Having six month’s worth of expenses saved in cash is the number I’m comfortable with. I encourage you to spend some time thinking about what’s correct for you and your family. 


For your kids, time horizon is different and their ability to grasp it will depend greatly on their age. Regardless of their age, it’s important for you to have conversations with them about it. 


We’ll get into detail about the three jars later in this post, but short-term savings for a child could be as simple as waiting for the weekend to be able to buy something. Again, one of human’s biggest financial problems is our inability to wait for things. We can now buy just about anything on our phones with one click, and have it arrive at our house the same day. This is not beneficial behavior for a child to learn. 


For example, your child has $5, and they really want to go to the candy store to buy something. Instead of taking them that day, tell them you’ll be able to take them, but they’ll have to wait until Saturday. 


Mid-term savings


Again, for adults this is four to 10 years. For kids, talking about a vacation that you have coming up is a great teaching opportunity. Share your planning process with them, going through as many details as you can. 

Tell them why you’ve decided to go where you’re going, how you’ll get there, and the costs associated with the travel. Talk about where you’ll stay, what you’ll eat, and all the costs involved. Have a conversation about how you budget and save to pay for it. 


The more they can hear how you made the decision to spend less today, so you can do fun things in the future, the more you reinforce delaying gratification. 


Long-term savings


This is hard for everyone to get their brains around. In order to save for the long-term, we need to think about ourselves getting older, and that’s not easy. 


But God willing, we’ll all one day be old. And when we’re old, we’ll be grateful our younger selves had the ability to delay gratification. 


If you’re putting money away for your child’s education, or saving in some other way, tell them about it. Talk to them about how the more time you have to save, the longer you can take advantage of compound interest. Tell them how getting started saving sooner means you don’t have to save as much. 

As the saying goes, the best time to plant a tree was thirty years ago. The next best time is today.  


How to do it


I advocate you pay your kids a weekly salary. It’s not an allowance. This is money they earn by completing their jobs and responsibilities.


My suggestion is that you begin with a $5 weekly salary.  I break it out into three categories, Spend, Save and Give. $2 for Spend, $2 for Save, and $1 for Give. 


While there are a lot of great apps and technologies for doing this, I think it’s important to give them cash, and to put the money in three clear jars. 


You’re more than welcome to give your kids more than $5. What’s important is the breakdown of 40% of the salary to Spend, 40% to Save, and 20% to Give. Even if you start with $5, you’ll eventually increase it over time. 


I suggest you designate one day and time every week for paying the salary. That way, you won’t forget to do it. We do it Sunday morning. 


The money that goes into the Save jar should be earmarked for larger purchases.


The first time we did this with our first kid, we were at the park. We saw another kid playing with a glider and my son really wanted one. We got home, researched where to get one and the cost, and we put together a plan for buying one.

We figured out it would take him three weeks to save up his salary to be able to buy it. I printed a picture of the glider and wrote down how much he needed and how long it would take until he could afford it. It was a wonderful experience and we had a lot of fun with the glider. 


Always be teaching


There are constantly opportunities to be teaching and reinforcing positive saving behaviors. As you’re getting started, you won’t necessarily be great at it, and that’s ok. You’ll get better every time you do it. 


Be honest with them. If you got started saving early in life, let them know. If you waited and now have to save more, tell them that. 


If you’re not where you want to be financially, that’s ok. It’s all about addressing your situation head-on and developing a plan to get where you want to go. Don’t feel like you need to be an expert or financially successful in order to help your kids be good with money. You don’t. 


What you need to do is get yourself on the path to financial security. Once you arrive there, you can develop a plan for achieving financial success. 




If you’d like to help your kids get good with money, check out our Teaching Kids about Money course. 

If you’re ready to take control of your financial life, check out our DIY Financial Plan course. 

We’ve got three free courses as well: Our Goals Course, Values Course, and our Get Out of Debt course. 

Connect with one of our Certified Partners to get any question answered. 

Stay up to date by getting our monthly updates.

Check out the LifeBlood podcast.


You’re someone who is capable of helping their kids get good with money. Feel good about taking these initial steps!

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