As I’ve mentioned a few times on The Simple Dollar, we use piggy banks and allowances with our young children in our home. We have a few simple rules that go along with this, mostly allowing them to freely spend part of their allowance while they save another part of their allowance for longer-term goals (and our oldest has a few other restrictions as well). The amounts we’re talking about are small – we give them fifty cents per week for each year old they are.
When we first started doing this, we expected our children would save for small goals. Since their allowances were on the order of $2, we assumed that they would set relatively modest goals out of a lack of patience.
Instead, they both took the opposite approach. Instead of saving for small items, both of our children chose to save for big items – or, to be more accurate, item lots that save them money per item.
Our son is a big fan of Dragonball Z (an animated series), but the action figures are a bit hard to find around here. Since he’s wanted to use his allowance to buy the action figures, we’ve had to turn to the internet to find figures for him.
While we were searching various sites for figures, I found that time and time again, he was more interested in buying a bundle of used figures over anything else. This was the best way for him to get a low per-figure price, even if the total cost was quite high.
The amazing part? He didn’t grow impatient with the process. He kept saving week after week for a big lot of used figures (with a requirement that two specific characters be a part of whatever lot he wound up with). Eventually, after saving for many, many weeks, he bought a six-figure used lot.
Interestingly, our daughter (who is a bit younger, only three) did almost the exact same thing with the princess dolls she’s enamored with. Rather than going to the store the first second she could afford anything, she waited because she understood that she would get more for her money by waiting. Similarly, she wound up purchasing a mixed lot of dolls at roughly the same time as our son’s action figure purchase.
The patience and willingness to bargain hunt exhibited by both children during this process impressed me greatly. I could not be happier with their progress in terms of setting goals and saving for them, particularly considering the children are five and three years old, respectively.
Making This Work: Five Tactics that Work
So, how did we get to this point? Here are some of the tactics we’ve used along the way to get our children on a good path for saving for the future.
1. “Do as I do“
We don’t have a practice of telling our children one thing, then doing another. We save for goals, too, and often do this visually right in front of the children. I actually have a savings jar that I put money in to save for a goal, and that jar will often sit for months, slowly accumulating money.
2. Very regular goal discussion
We talk about goals of all kinds all the time. What do we want to accomplish this week? This month? Where do we want to be in a year? What are we saving for? All of these questions come up very regularly in discussions with our children. We share what we’re doing and encourage our children to do the same.
3. Visual money use
As often as possible, we use money in a visual fashion. We pay their allowance in quarters. We allow them to swap quarters for dollar bills, so that they visually understand that connection. We also count the dollars they accumulate. The money doesn’t just disappear into a savings account or a checking account. Even on the occasions when we pay using a debit card or a credit card in front of the children, we immediately relate to them that the card is just telling the store that we will pay them the money later so that it’s easier to pay.
4. Minimizing focus on material acquisitions
Our children don’t feel the need to have something new every week because we don’t put much of an emphasis on acquiring more material things. We already have lots of things to enjoy, so why should we have more? We’re far better off waiting around for something we genuinely want instead of spending money on an impulse.
5. Imaginative play
As often as possible, we channel play in imaginative directions. We have a “dress up” tub that our children delve into for things to wear. Quite often, we’ll pull out building blocks and build something entirely new. We’ll make up games or play simplified versions of others (like the current favorite, “Dad Is a Zombie”). Such play doesn’t require material things – in the cases where material things are used, they’re incidental. Doing this as often as possible shows that fun and joy and the good things in life do not have to come from material items.
I can’t guarantee that my children will be financially sensible as adults, but I can be sure that I’m doing what I can to give them the tools to be financially sensible as adults.