By Holly Jones
If there’s a golden rule when it comes to savings and building healthy money management habits, it’s this: the earlier you start, the better off you’ll be in the long run.
Money management is probably the last thing on the minds of most kids—if it even registers at all—but there are concrete steps you can take as a parent to help ensure that your children know how to think about money, including the importance of saving for the future. If you plant those seeds with care, they’ll take root, and your children will be much more likely to achieve financial success later in life.
So what lessons can we give today’s children and young adults to prepare them for financial success in the future? Today’s kids are much more likely to spend rather than save. Even parents who try to teach their children about finances, such as by giving them a regular allowance, might find their lessons overshadowed by stronger messages that come from advertising or from children’s peers. Unfortunately, by the time most young people graduate from high school, they know all about spending and very little about saving or spending wisely.
Consider these facts:
• Among U.S. teens, 40% say they are saving, 24% say they are saving more than they did last year, and 21% say they are not saving at all. (Sources: Marketingvox; Rand Youth Poll; Seventeen magazine; Packaged Facts)
• Only 13% of 20-21 year olds and less than 50% of 28-29 year olds say that they are contributing to a retirement savings account. (Source: PNC Financial)
• Among those aged 25-34, 78% say they don’t have enough money to live the kind of life they want. Among those aged 18-34, 39% say that they had either been living with their parents or had moved back in with them as a result of the current economic situation (among 18-24 year-olds, this number is 53%). (Source: Pew Research, 2012)
On April 23, 2013, thousands of bankers, including many from Wells Fargo, connected with kids in classrooms and after-school programs across the country during the annual American Bankers Association’s Teach Children to Save Day. These efforts pave the way to help young people take an important first step in mastering their financial ABCs. In addition, Wells Fargo committed to using the entire month of April to highlight the financial education programs it offers to children, teens, young adults, and adults year-round.
Five Tips for Parents
Parents play a crucial role in their children’s financial success later in life. Here are five tips for parents from Wells Fargo:
1. Start early — Before they even start school, children begin to understand the process of managing money.
2. Set goals — Have children write down things they want and what they cost. Teach them about making choices and saving.
3. Pay a Modest Allowance – Just a small amount can help children learn.
4. Make a budget — Start with three categories: spend, save, give.
5. Use Free Resources — Check out your local library, and the Hands on Banking® website, a parent-tested, parent-approved program available free at handsonbanking.org; Wells Fargo’s children’s financial success resource center at www.wellsfargo.com/resource_center/childsfuture; and your public library, which likely has a number of good books on the topic.
A tip for children ages 3-7: Take three jars and label them separately: Spend, Save, Give. Help your children split up their money into each jar and watch it grow as they save and disappear as they spend.
A tip for pre-teens, ages 8-12: Create a short-term savings box. Have the pre-teens choose something they want (a brand name pair of shoes or a video game system). They will learn the value of savings when they save enough to purchase the item.
A tip for teens, ages 13 and up: Open a savings account for long-term savings. Have teens save a certain percentage for a few years to make a bigger purchase.
Parents should ask their banker for more ideas and advice. Your child’s long-term financial security is at stake. By starting early, you can help your child develop good financial habits that will last a lifetime.
Holly Jones is an Area President for Wells Fargo in Houston. As a public service, Wells Fargo provides free and fun financial education programs without commercial content.