How to Motivate Children to Save

The foundations of financial success are laid in childhood. Children absorb their parents' experience with money: how they earn money, spend it, and save it. However, a parental example alone is insufficient for teaching kids about money and wise money management. Only by gaining independence will they learn a balanced attitude to their resources.

The Best Way to Save Money for Kids

One of the most essential skills in managing capital you can develop in your child is the ability to save money. It will be needed in many cases, including achieving long-term financial goals. Moreover, savings will help out in difficult times with unforeseen expenses. Therefore, teaching children to economize is one of the key tasks the parents should perform. 

Even if your family has enough financial resources, warm up the child's interest in saving money. In this article, we will present the best way to save money for kids, taking into account child psychology. It is quite possible that by teaching your child to save, you will subsequently receive a wise advisor. They will tell you when you are acting inconsistently in relation to money. In this way, they will contribute to your financial success.

Why Is It Important to Teach Children to Save Money?

Although the EU is one of the wealthiest regions, the risk of poverty, unemployment, and social exclusion is also high. According to Eurostat estimates [1], about 21.0% of the EU population was at risk of poverty in 2024. What's worse, this figure is even higher among children [2], approaching 25%. With these alarming figures in mind, parents should motivate their children to save money from an early age. 

Still, this is necessary to prevent children from falling into poverty later in life. Teaching kids about saving money can bring many other positive consequences, such as:

• Making wise spending decisions. Children learn to make independent decisions by managing their own money. And by putting some of their money aside as savings, they learn the skill of considering the consequences of their decisions.
• Gaining independence for their spending. Savings make a child more independent. They do not ask their parents to finance any important purchases because the child can use their capital, even if it is small.
• Developing patience. Children learn to take small steps towards their goals and believe in achieving them. By saving even one euro to realize their dream, they come closer to it. In this way, they accept the need to be patient and persistent.
• Fostering responsibility. Children understand that the amount of money in their piggy bank can go up or down. The latter happens if they spend too much. This makes them more responsible with their money.
• Developing a sense of financial security. A child who does not have their own money has more reasons to worry. They never know whether their parents will agree to buy the thing they want. If a kid has saved some money, a sense of financial security gives them peace of mind.

Tips to Motivate Children to Save Money

Financial decision-making experts have found [3] that children as young as five years old develop emotional reactions to their spending or saving. Moreover, they can translate these emotions into certain behavior patterns. Therefore, parents should begin teaching kids to save and lay the foundations for wise money management by this age. Still, how to teach your child the value of money? Using a comprehensive approach, you can develop the need for savings and a sense of self-esteem in your child through effective money management.

Discuss Wants vs. Needs

Adults often fail to understand that children cannot distinguish between wants and needs. This is the reason for their persistent demands to buy a new toy, another cake, stationery, etc. They think that they need these things just because they want them. Therefore, be patient when you teach kids to save money. Help them form a sense of the difference between the first and second:

• When you go to the supermarket with your child, first fill the basket with the necessary products. Explain that it is impossible to cook their favorite dishes without them. Then move on to optional products the child likes but can do without. Do this periodically so that they feel the difference.
• Make a list of needs and desires for your family. In one column, write down what is important to do in the near future. For example, this could be repairing a leaky roof, buying new winter boots, paying for electricity, etc. In another column, write down desires ‒ a trip to the sea, a new car, a luxurious pool, etc. Let your child feel the difference between mandatory and optional expenses.

Let Kids Earn Their Own Money

When teaching money to kids, identify some activities for which you will give your child a small amount of money. It is better not to spoil them with large sums. If you have difficulties with money, you will not be able to reward your child at the same level, which may cause disappointment on their side. Therefore, giving as much money as you can in any situation is better.

Also, you should not give money for what the child should do anyway. For example, brushing teeth, making the bed, clearing the dishes after dinner, and other routine chores should not be a reason for material encouragement. Stimulate those chores with money for which the child makes additional efforts:

• Harvesting in the summer season;
• Helping an elderly neighbor walk the dog;
• Washing the car;
• Helping to care for a younger brother or sister;
• Reading additional literature for homework;
• Selling unnecessary things, etc.

Set Savings Goals

The child should understand why they need to save money rather than spend it. Help them choose the goals for which they will want to save money. For example, it could be buying an expensive toy, sporting goods or an electronic device, a trip to an exciting place, a gift for a relative or friend, etc. It would be excellent if you could motivate the child to save money for some altruistic goals. In this case, you will help the child overcome selfish desires and form the basis for empathy and positive social connections. For example, teaching children to save money, you can offer your child to help an animal shelter, contribute to medical treatment for other children, etc.

Write Down a Savings Plan to Meet Goals

Visualizing financial progress towards a goal is important when you are teaching about money for kids. It is helpful in maintaining a kid's patience and persistence. Come up with a way to convincingly present a financial plan to your child. For example, do the following when you teach children to save day money:

1. If your child wants to buy a dog, draw it on a large sheet of paper.
2. Determine how much money they need to save to buy it.
3. Divide the cost of the dog by the number of euros you usually give your child.
4. Illustrate the resulting figure as a large number of small dogs.
5. Suggest that your child color in a small dog every time they throw a coin into the piggy bank.

This way, the movement towards the financial goal will be visible. And the visual perception of progress will motivate persistence in saving.

Provide a Place to Save

The easiest way to collect money for a child is to throw it into a piggy bank. It is effective because you will have to break the piggy bank to take money from it. When you are teaching kids to save money, this is an additional deterrent to unnecessary spending.

But if you want to improve your children's digital financial literacy when you teach kids to save, choose other methods. This is especially important in the context of the fact that more than 75% of Europeans [4] shop online. Therefore, for older children, you can offer the following options:

1. Family banking solutions;
2. Pocket money apps;
3. FinTech solutions.

Such accounts and applications give parents a certain degree of control over their children's spending. This is good in terms of tracking the child's progress in mastering the skill of saving.

Teach Them to Track Spending

Analyzing a person’s expenses is essential to saving effectively. Teach children to write down what they spend their money on. And at the end of each month, analyze what they could have saved on:

1. You can offer a small child to draw their purchases in a separate album.
2. Younger schoolchildren can keep their financial diary.
3. Starting in middle school, children can confidently use budgeting apps that will teach them additional skills in managing money.

Offer Savings Incentives

To reinforce your child's desire to save, offer additional incentives. For example, if your child is saving for a new computer game, promise to buy another one with your money. If your child saves for a new cat house, you can visit the zoo together. Be creative with your incentives; they don't have to be only about additional purchases. They can be anything your child wants. For example, when you teach children to save, promise to spend the weekend how your child wants. Or let your child dye their hair blue. This way, you give your child more than they would get from a single purchase.

Talk About Money

Share other secrets about money management with your children, not just the best way to save money for kids. For example, tell them the amount of money can increase if they invest it in profitable projects. Or explain why keeping large sums of money in different places is better. Warn them about the risks associated with money and the opportunities it provides.

Set a Good Example

Be open about how you manage your money. For example, tell older children about your income, what part is spent on mandatory and optional expenses, what part is saved, invested, etc. Involve them in monthly budgeting. By learning this science in practice, they will be able to manage their income more effectively. And, of course, avoid unnecessary spending, so as not to set a bad example. Seeing how you value every euro earned, the child will be more responsible with their money.

How Can Parents Encourage Their Kids to Save Money?

Parents should use additional incentives to make saving a habit for their child. Money saving tips for kids suggest that you can add an element of play or surprise: 

• Use additional tools to visualize saving ‒ these can be drawings or a construction set. By throwing a new coin into the piggy bank, the child can add another piece to the figure they are building from the construction set. Watching this figure grow, they will better understand the essence of saving.
• You can also promise that when the piggy bank is full, you will go to a children's supermarket together, and your child will be able to choose any gift. Such an element of surprise will also fuel the child's interest in achieving their goal as soon as possible.

What Are the Barriers to Teaching Kids About Saving?

• Different attitudes toward money among their peers. If all children save money, your child will easily follow their example. But many children spend money as soon as they receive it from adults. So, your child may feel uncomfortable saving their money instead of spending it on entertainment, toys, or treats.
• If a child rarely receives money from parents or other adults, it is difficult to convince them to save. Monetary gifts should be more regular to develop this skill in a child.
• If parents do not save, it is difficult for them to teach kids about money and persuade them of the benefits of saving. When parents spend money easily, what they say is at odds with what they do. The child is more likely to absorb their financial behavior patterns rather than their teachings about money.

Summary

To succeed in life, a person must be able to save money and direct it to promising projects. That is why teaching children to save should start in early childhood. Otherwise, they will develop a habit of squandering all the money that comes their way. However, you should not force a child to save or punish them for not doing so. Create incentives that will help awaken their interest in saving. Add visualization, elements of a game, or a surprise. In this case, you will achieve much more significant results. And the child will perceive saving not as a limitation but as an opportunity to get something more.

List of References

1. Source: ec.europa.eu
2. Source: eurochild.org
3. Source: huffingtonpost.co.uk
4. Source: ec.europa.eu