Best way to save money for kids future
Saving money is never easy to do, but it is necessary. Saving is one of the best ways to help your kids prepare for their future. Having money saved and developing healthy money habits early on is hugely beneficial.
When your kids are ready to buy their first car, enroll in college, and put a downpayment on their first house, they need to have money. And since they'll be dealing with cash for the rest of their life, they need to know the ins and outs of saving.
Chores for kids to earn money
Doing chores around the house is the most common way for kids to earn their first dollar. You might not pay your kids to do everything, but paying your kids for some chores is an excellent way to teach them about earning money.
One of the main benefits of paying your kids to do chores is that it teaches kids that they need to earn money. Money doesn't simply grow on trees. This is a great lesson to prepare kids for the real world and instill a sense of confidence when they're able to work hard and save a lot of money.
Of course, your kids should be willing to help you out for free, but a weekly allowance can also help motivate your kids. Then they'll be taking out the trash, doing dishes, and more before you have to ask. As your kids grow up, they can move from chores to being a young entrepreneur.
Once your kids start earning money, even if it's just a few dollars per week, they should learn about saving it. We all struggle with instant gratification. We want things right away and hate waiting for them. Saving money is a disciple, and the earlier you can develop it, the better!
Can you make saving money fun?
Most people think of saving money as something they need to do, but not something they want to do. You'd rather spend money at the mall, eating out at a restaurant, or grabbing a much-needed coffee. As a kid, you absolutely need that new video game or a new toy from the store.
We often spend our spare money on fun activities, which makes saving your extra cash the direct opposite of fun.
The truth is, not having enough money leads to stress. The American Psychological Association reports that money is the top cause of stress in the United States. And that 72% of adults have stressed about money in the past month. So, while we won't get the instant gratification, saving money will lead to a more enjoyable, less stressful life.
Saving is essential when we're young because we don't have the responsibilities and bills that come with adulthood. Kids don't need to worry about paying their mortgage, car, insurance, phone, or grocery bills. They can start saving a good portion of their money and set themselves up for a successful future.
Books about money
Reading books about money can help kids understand how money works. Since they're not working a full-time job or paying bills, most kids don't know the difference between $10 and $10,000.
Books can teach children how to earn money and what it means to spend and save their money.
Here are a few great money books for kids:
- Isabel's Car Wash by Sheila Bair
- Alexander, Who Used to Be Rich Last Sunday by Judith Viorst and Ray Cruz
- If You Made a Million By David Schwartz and Steven Kellogg
- The Everything Kids' Money Book: Earn it, save it, and watch it grow! By Brette Sember
And if you need some extra help teaching your kids about how money works, we recommend reading Make Your Kid A Money Genius (Even If You're Not) By Beth Kobliner.
Playing games about money
I'm sure most of us have played Monopoly at some point and gotten frustrated when we lose. Monopoly is probably the most popular game out there to help young people learn about handling money. There are plenty of other great games that can help your kids understand counting, saving, investing, and spending money.
Playing games that involve money can also help make it more relatable for your kids. Playing a game will add some extra fun to learning about saving and earning money.
The Game of Life is a classic board game that helps introduce kids to things like budgeting, as well as insurance, taxes, and other financial situations. PayDay is another classic game that simulates what it's like to get paid while also navigating financial responsibilities. The game board resembles a calendar month, and each space represents events or bills to pay. Players can also receive 10% interest on their savings when they land on the Pay Day spot.
Of course, not every game will turn your kids into financial experts, but it can help introduce them to handling money in a fun way.
Where to keep your savings
Kids often put their first savings in a piggy bank. That can be a good way to start saving a few dollars or spare change, but piggy banks have their limitations.
Piggy banks are useful for collecting spare change and keeping it safe, but they're not an effective way of growing your saved money. When you're committed to saving money for a big purchase, your money needs to be growing itself. One of the best things you can do is have your money make money for you. The spare change in your piggy bank will never grow on its own.
You could open a savings account, but those also have their limitations. The FDIC estimates that the national average interest rate on savings accounts is only 0.05% APY. This applies to both average and jumbo deposits. That means you'd need to have $2,000 in savings to earn an extra $1.00 in interest.
There are opportunities to invest your savings and see bigger gains. Of course, there is a greater risk when you invest, but greater risk = greater potential reward. Even though you can't predict the stock market, the average return is around 8% for long-term index investments. Your $2,000 could earn almost $200 per year including dividends. That's much better than the $1 a savings account will give you.
A Loved custodial account is designed to help your kids save and invest their money. Instead of keeping it locked in a piggy bank, you can invest it together to earn dividends and more significant returns. Click here to open a new investment account with Loved!