A few weeks ago, my boss talked about his daughters Cody and Nana (who are Grades 5 and 4 I think) and how they have a joint savings account. I was really impressed by how at their young age they’ve learned to save. I was happy to hear that the lost art of saving is not too lost after all.

The problem with our schools is that they don’t teach kids financial management. I certainly did not learn about money when I was in Grade School. I learned addition and subtraction, but that was about it. And yet this is a very important skill to learn from a young age, something that will literally earn dividends later on in life, and assure us that we were able to prepare our children well enough for the future.

Here are some tips on how to teach our kids the lost art of saving:

1. Know how your kids think when it comes to money (or anything else). Preschool and elementary-aged kids will have trouble understanding abstract concepts like inflation, interest rates, and saving for a college education that is 12 years away. So focus on literal and concrete things.
2. Have your child create a budget with categories such as new toys, candies (think about this if you want to really make this a category), or birthday gifts for friends and family. At the end of each month, sit down and revise the budget with your child to help him gain a better understanding of how he is spending his money.
3. Take your child on money-related “field trips” that show money in action. Bring your child with you when you open a savings account; try to organize a tour of a bank vault, show him a coin-counting machine, let him compare sticker prices, help him recognize a sale (it’s never to early to start this). There are a lot of everyday ways to learn about money. Aside from being educational, involving your child in these activities teaches him/her that money is not just something for adults.
4. Encourage your child when he or she tries entrepreneurial ventures like lemonade/iced tea stands, selling special stationeries in school, or starting a dog-walking service (yes, some kids do this!). When I was in grade school, I used to cut grass and sell newspapers during summer vacation to earn extra money. My parents were probably really afraid for my safety, but to their credit, they never discouraged me from doing it. Those summer work experiences formed me and taught me many valuable lessons.
5. Be mindful of how you talk about money, specially when you’re in front of your kids. Do you complain about bills, fret about money, and always use negative terms about finances? Don’t be surprised, then, if your sons and daughters feel negatively, too.
6. Show your child how your family saves money. You don’t have to reveal everything and go into the nitty gritty, but young children will appreciate an explanation of how you and your spouse plan to save for the family’s summer vacation for example. They will probably cut down on their own expenses when they learn that the whole family wants to save.
7. Explain that credit cards don’t offer “free” money. If your child frequently sees you using a credit card to pay for purchases, he may not understand that you must repay this money with interest. To further illustrate the importance of not buying items they can’t afford, consider charging your child a small amount of “interest” whenever he must borrow money from you as the result of poor financial decisions.
8. When using a credit card at a restaurant, take the opportunity to teach children about how credit cards work. Explain to children how to check if the bill tallies to what you ate, and how to calculate EVAT and service charge. This will teach your child and you to get into the habit of double checking your bill. It’s a good financial habit and it’s always better safe than sorry later on.
9. My favorite: Help children learn the differences between needs, wants, and wishes. This will prepare them for making good spending decisions in the future. Oh, and maybe you need to brush up on the difference of these three things too? :p
10. Keeping good records of money saved, invested, or spent is another important skill young people must learn. To make it easy, use 12 envelopes, 1 for each month, with a larger envelope to hold all the envelopes for the year. Establish this system for each child. Encourage children to place receipts from all purchases in the envelopes and keep notes on what they do with their money. (By the way, I still do this now to keep a tab on my purchases. I just get rid of the receipts after two months).
11. Allow your children to make spending decisions. Whether good or poor decisions, they will learn from their spending choices. You can then initiate an open discussion of spending pros and cons before more spending takes place. Encourage them to use common sense when buying. This means doing research before making major purchases, and waiting for the right time to buy (like mall sales, etc.).
12. Don’t “save” your child. If your child has been saving for a new video game but wastes his allowance on other things, let him realize that his actions will have consequences. Do not spoil him by buying the video game anyway. By insisting on being a “good” parent, you have just lost a valuable opportunity to teach your child a lesson.
13. Make it fun. Having said all the things above, saving should be a fun activity or your children will hate it for the rest of their lives. As with many things in life: no nagging, and forcing your kids to save.

In the end, I think the key here is to be a good example to your kids. What you do to your money will have an impact on how kids deal with money and finances as well. Show them how to use money wisely through your own purchases and small financial decisions. If there’s something you want but can’t afford, let them know that you, too, can say no to yourself. And maybe they will too. :p