This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.
It’s all about keeping them motivated and informed.
Image source: Getty Images
My children’s ages range from 8 to 11, so clearly, they’re too young to actually go out and get jobs. As such, the money they get their hands on tends to be cash that’s gifted to them, whether for a birthday, the holidays, or to celebrate a lost tooth. And also, they don’t tend to get their hands on hundreds of dollars at a time.
The tooth fairy, for example, might give them anywhere from $1 to $5, depending on how generous she’s feeling. And while they might get a birthday gift of $25 or $50, even these aren’t life-changing sums of money.
Save: This credit card has one of the longest 0% intro APR periods around
More: Save while you pay off debt with one of these top-rated balance transfer credit cards
But still, I refuse to let my kids keep cash in the house. If they do that, they might lose it or bring it to school and use it for silly things (like buying snacks in the cafeteria) that are hard for me to monitor.
That’s why every time my kids get some cash, whether it’s $2 or $50, that money goes into their savings accounts. But my kids also know that these accounts exist, and that the money in there is theirs.
Not only that, but I make a point to review my kids’ savings account balances with them every few months. Here’s why.
Being looped in keeps my kids motivated
When you’re young and all of your money is tucked away in the bank, it can be easy to either forget about it or not realize that it’s growing. But it’s important to me that my kids realize that the longer they leave their cash untapped, the more interest they can earn on it.
My youngest kids (who are both 8 years old) are only first starting to understand the concept of interest. But my older child totally gets it. And now that savings accounts are finally starting to pay more generously (many high-yield accounts are paying 4% or more), I’ve made a point to sit down with my kids every few months and look at their balances so they can see how their savings are increasing.
This is an important thing, because on occasion, my kids will ask for a $3 withdrawal here or a $5 withdrawal there to buy what I consider to be silly things. Now I believe in giving my kids access to that cash, since it’s theirs. But before I do, I’ll remind them that taking small withdrawals here and there will lead to them having less money down the line. And that’s gotten through to them.
In fact, another reason I review those bank account balances with my kids is to show them the impact of not taking those small withdrawals for fairly meaningless things. And now, my kids are more motivated to save up for bigger, more important goals.
A new option to introduce
I want my kids to feel empowered to manage their money — with my help, of course. Now that CD rates are finally up, I plan to sit down with my children, explain the concept of CDs, and ask if they want to put some or all of their money into one.
I’ll make sure they understand they’re making a commitment, and that they won’t be able to take withdrawals for a preset period of time. But I’ll also be sure to explain the upside — earning a higher interest rate on money they aren’t planning to use right away.
All told, I believe in educating my kids about personal finance, even though they’re pretty young. But in teaching my kids to take pride in growing their savings now, my hope is that they’ll be motivated to continue growing their savings as adults, too.
These savings accounts are FDIC insured and could earn you more than 12x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 12x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
