Today kids as young as five are receiving money on a somewhat regular basis. Between allowance money for chores and the gifts from friends and relatives for special occasions, kids often have a stockpile of cash burning a hole in their pockets. As soon as a $5 or $10 falls out of their birthday cards, they think about all the toys and candy that can soon be theirs.

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But as a parent, you have an obligation to teach children about money and the importance of saving if you want them to be financially wise later in life. The earlier children start to understand what saving means and how to go about it, the more likely they will grow up to be more financially responsible.

Demanding your children save money may not go over well no matter what age they are, so it is important to do the ‘demanding’ in the right way and educate them on matters of money from day one. While pre-schoolers may not care much about the economy or their college fund, they can start learning the value of saving if you offer consistent guidance and encouragement each and every time they receive some cash.

How Demanding Should You Be As a Parent?

You want the best for your kids and likely have a set of rules for your home and beyond that kids must follow. With a subject as important as financial stability, you should also have expectations from children when it comes to money. Your lessons and rules will need to be at age appropriate levels but consistency is a must-have if you expect your child to follow through.

Additionally, you must also be willing to back up your lessons by also doing what you are teaching your child when it comes to your own money issues. Younger kids may not catch on like older ones when you harp about saving more money while at the same time bill collectors are calling your house day and night demanding payment or repossessing your car. Shore up your own financial life as you take a proactive role in helping your child understand the importance of financial independence. Your example will be the best lesson a child can learn.

Demands on Toddlers

Little children who can’t even decipher the difference between a nickel and a dime can still learn the importance of saving. Young ones need to have fun incorporated into their learning experiences. Start with a piggy bank or a large jar decorated by you and your child. Let them know that money is important, especially when it is saved in a safe place. Make a game of helping them hunt down loose and lost change to add to their banks on a weekly basis. As they grow, open the piggy bank and help them to identify the coins inside. Count up the coins and let the child help you roll the money in wrappers. A trip to the bank each month may reward them with a lollipop but will also help establish a pattern of saving.

Demands on Grade-Schoolers

Kids in elementary school are learning about money and math each day in school. It is time to up the ante by introducing chores for allowance money and scheduling times in the week to talk about their bank account and the importance of saving. As you go over your child’s homework concerning math and money, talk about why people need to save money and how banks add interest to their account. Speak with your children about adding part of their allowance money to their own bank account on a regular basis.

A good rule of thumb is to help your elementary school-aged child figure out what 10% of their allowance is each week and put that money aside for deposit into their bank account. Demand the same percentage or more is taken from cash gifts children receive. If kids have been saving since their toddler years, the requirements will seem normal. Schedule a set day to take your child to the bank with a deposit so they know when to expect the trip. Work with them on their savings book register to do the math for each deposit. Praise them for their hard work in savings as the account funds continue to grow.

Demands on Teens

If you have been requiring your child from a young age to save a portion of their money for deposit into a bank account, your child may seamless continue contributing their money into the bank without hesitation. However, as kids get older and want more expensive things, they may give you a harder time in parting with their cash. Parents need to continue to enforce the value of saving.

If a teen starts earning a paycheck, increase the percentage of money that needs to be banked but also help them to establish goals for savings. While the majority of money should be allowed to grow in an account, teens should also understand the process of saving for what they want. Help teen calculate the cost of what they want and help them figure out a savings plan to achieve the purchase rather than allowing them to buy something outright just because Grandma gave them birthday money. Add an additional percentage to the normal percentage of deposit for their goals and help them calculate the amount of time they will need to save in order to make the purchase.

Goals for finances should be defined with the future in mind. Not only should teens be saving for their next iPhone and their first car, they should also be learning about the expense of college and life after graduation. The more guidance parents can offer their kids, the more likely those children will leave the nest appreciating the value of money and the importance of savings. Parents should not rely on schools or even universities to teach the fundamentals of personal finance. These topics are just not discussed on the level necessary to establish a good financial foundation. Parents need to start children off on the right foot so they can travel forward to a financially-stable future.

For a different take on this subject, check out Simon’s column on “rethinking the allowance.”

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