Tips for Raising a Saver from Fidelity Viewpoints
Key takeaways
- Encourage good habits in children in age-appropriate ways.
- Money lessons can start as early as age 3 with a small, regular allowance.
- As children get older, reward good choices to reinforce your lessons.
Will your children be smart about money? The answer depends a lot on you.
Many people get their money values from their parents. That’s why it can be important for parents to teach by example, and talk with their kids about money at an early age. “Handing children money without showing them what to do with it can set them up for bigger money mistakes later in life,” says Ann Dowd, CFP®, a vice president at Fidelity.
It is possible to instill smart money values in children starting at a young age. Here are some strategies for each stage of a child’s development that can help you raise a money-smart child.
Ages 3 to 6: Make saving a visual experience
You may think that teaching money values to a 3-year-old child is an exercise in futility, but experts suggest otherwise. The more you can “show” children things related to money, the more they will absorb. “It’s very difficult for young children to delay gratification,” says Ian Gotlib, David Starr Jordan professor of psychology at Stanford University. “So you have to be creative about teaching them to save. The key is to make saving visual and very concrete.”
Young children can understand having a goal and making progress toward it—as long as they can see it happen. You might begin by giving them a small, regular allowance. Giving children an allowance can help teach them to manage their own money. But, it depends on how and when you do it. “If you give a young child a dollar and then walk away, you’ve taught her that she’ll get the money handed to her for nothing,” Gotlib says.
Instead, ask what they want to do with the money. With young children, consider having them put the money in a piggybank, where they can see it accumulate, or let them use it to buy something. That way they can start to understand, in a broad sense, that money can get them what they want. “Those principles can help build a foundation for more serious saving later on,” Gotlib says.
See more tips at Tips for raising a saver | Fidelity
