Helping Children Learn to Save for Purchases

Smart Shopping and Developing A Savings Plan for Kids

© Hayley Harrison

May 31, 2009

Because a child's sense of time is much different than an adult's, it can be difficult for them to plan for the future, particularly when it comes to an abstract concept such as money. In order for savings education to be effective, it is important for children to learn how to set goals for their money, but the key is to make the process very concrete and simple so that they can fully comprehend and appreciate the process.

When Kids Should Set Savings Goals

Before developing savings goals, it is important that a child has had their own savings account. Introducing the concept of banking along with goal setting is often too overwhelming for kids. Additionally, kids should be regularly earning an allowance or money for first jobs like babysitting or lawn care.

Choosing the Best Item for Kids to Save For

For children to truly appreciate the reward of saving, it is important for them to have the right motivation. Because of this, choosing the first item a child will save for is nearly as deciding where to open their first savings account, and should be considered very carefully.

1. Have the child make a list of five to ten things they might want to buy.
2. Review the list, estimating the amount of time it will take to save for each item, based upon the amount of money the child has available on a regular basis.
3. Choose an item that can ideally be saved for in a matter of weeks. Three months should be the absolute longest time frame for the first savings goal. Items like DVD's, video games, iTunes gift cards, clothing, or accessories are all excellent for first attempts at savings plans.
4. Discuss why that item is the best to start with, promising the child that the other items can be saved for later.

Demonstrate Smart Shopping

Shopping wisely and making informed buying choices are two important parts of saving. In order to instill children with the ability to shop smartly, they should begin before the savings plan is designed.

1. Make a list of retailers that sell the item with the child, writing them in a notebook that the child can carry on the shopping trip.
2. Visit the retailers with the child. Resist the urge to shop online as part of the experience of the savings plan is visiting the store to purchase the item after the required amount of money has been saved.
3. Have the child write down the prices of the item in the notebook next to the store's name. Ask them to write down any other information such as rebates or coupons that may affect the price.
4. Upon returning home, review the prices with the child. Have them identify which price is lowest.
5. Point the differences between the prices out to the child, showing them how important it is to shop wisely and not simply purchase an item the first place they see it.

Establishing and Executing a Savings Plan

Once the price of the item has been determined, its time to set up a plan and start saving. For this process, the price list, extra paper, a pencil, and a calendar will be needed. It is important that children come up with the majority of the answers for the plan on their own, that they are allowed to engage in self-discovery, which is necessary to their learning.

1. With the calendar, ask the child when they would like to purchase the item.
2. Count out the number of weeks until the date they select.
3. Using their allowance or the amount of money the earn on a regular basis, ask them to calculate how much money they will have in that number of weeks.
4. Determine together if that is enough time to save for the item. Make sure the child takes into account how much of their money they will need or want for other things.
5. If the original amount of time is not adequate, discuss how much the child can save each week. Have them divide the amount of the item by the amount the child specifies, and use this as the savings goal.
6. Once the decision has been made, have children write a savings contracts. Something like "I will save $3 each week for seven weeks to buy the new Hannah Montana DVD" will suffice. Have them sign their name and place the contract in a place that is frequently viewed, such as on the refrigerator or on a bulletin board.
7. Each week, take the child to the bank so that they can fulfill their contract.

Making a Child's First Savings Withdrawal and Purchase

Once the plan has been executed, it's time for children to reap the rewards of their savings. It's important that enough time is allowed for this to feel like a special event, so try not to schedule the trip when it's necessary to do other shopping.

1. Visit the bank, taking the child to the check writing desk.
2. Help the child fill out a withdrawal slip and notate the amount of the withdrawal in their savings book.
3. Allow the child to pass the withdrawal slip to the teller.
4. Ask the child to count the money one time before leaving the teller window. If they are responsible enough, allow them to carry the money out of the bank and to the store.
5. When visiting the store, allow the child to take the lead, selecting the specific item, carrying it to the check out, and handing the money to the clerk.
6. While at the store, praise the child for following through on their savings plan. Small children might feel special if the clerk is notified that the child saved the money for the item themself, but this might embarrass tweens or teens.
7. On the trip home, ask the child what they wish to save for next and start the process over again.

Next Steps for Teaching Children to Save

After the child is consistently setting and achieving settings goals, parents can move on to other lessons with their children, including setting savings goals, understanding banking, and eventually, opening a checking account.

Using the calendar to make a savings plan

Print Article

View All Articles

How to subscribe to feeds