There is no better time in life to develop good habits than when we are young. It’s why parents work so hard to teach their kids good habits at an early age. Things like taking care of their teeth, keeping their rooms clean, even being polite. It’s also the perfect time to begin teaching them about financial responsibility and the importance of saving.

There are some simple steps parents can take with their kids to get started, some that can even be mutually beneficial.

Give Them Actual Money

Before they ever come near a bank account or credit card, it’s important to instill the value of a dollar. Even young kids love getting pennies, nickels, and dimes. Plus, counting coins and bills not only shows them that money adds up, but it’s a good way to help preschoolers with hand-eye coordination and math skills.

Let Them Earn an Allowance

The best way to add money to their savings, other than birthday and holiday gifts, is by having them earn it. Whether you choose a weekly or monthly allowance is up to you. As far as how much to pay them? The general rule is to start with a dollar amount equal to how old they are (ie:5 years old gets a $5 allowance) then to increase that by $1 each year, so the incentive grows as they do. Make sure the allowance is based on completed chores, so the kids understand that money is earned.

Get a Piggy Bank

Now that they’re getting money, they need somewhere to keep it. A piggy bank is a great way to teach children about saving money. Explain to them what it is for and that the more they save, the more their money will grow. Make sure and use a clear container, that way they can see the money add up, which will give the kids a sense of accomplishment. 

Set a Goal

Now that they’re saving, set a goal for how much they should save up. Whether it’s filling the bank all the way to the top, or a specific dollar amount, give the kids something to shoot for. That way they can feel good when they’ve reached the goal. The first goals should be reachable, fun and defined by both the parent and child.

Open a Bank Account

Once that piggy bank fills up, it’s time to open a savings account for your kiddo. Have them count out how much money they’ve earned and how much is going into savings so they know how much there is.

Take them with you to the bank to make the deposit. A trip to the bank may be a new and fascinating experience for your child, plus it’s good to have them hand the money to the teller.

Also important is to talk with them about interest. It can be a great source of motivation for your kids to save if they understand that their money will grow over time as long as they don’t touch it.

Instill the Importance of Giving

Once the kids start making a little money, it’s the perfect time to start talking about the importance and value of giving. Whether they pick a church, charity or even someone they know who needs a little help, let them choose who to donate the money to. Eventually, they’ll see how giving doesn’t just affect the people they give to, but the giver as well. 

Talk with Them About Money

As the kids get older, don’t be afraid to have open conversations about money with them. Feel free to discuss sensitive financial matters with the kids in the room, instead of shooing them away so the “grown-ups can talk.” Talking with them about money helps to remove the mystery around it and can help them make smart choices later in life. Young kids might not understand everything you discuss, but that’s okay. They don’t understand all the words in the stories you read with them either. But, like the stories, hearing things repeated helps them learn meaning and have it ingrained into their minds early.

Use Praise and Tough Love

This is the hardest but one of the most important points; using a combination of praise and tough love to instill fiscal discipline.

Reward kids for saving. Every time they drop money in their piggy bank or make a deposit in their savings account, give them verbal praise. When they reach a financial goal, reinforce the good feelings that come from it. Maybe even celebrate with a low-cost treat, like extra TV time or dessert after dinner.

On the flip side, hold your ground when temptation strikes. When the kids want to buy something and don’t have the money for it, don’t offer to pay for the rest. Help them understand that’s part of life and that they’ll have to wait and keep working toward that purchase. It also helps to point out that small purchases, like candy and trinkets, keep them from making the big purchases. 

Sure, it’s tough love, but it’s love that will benefit them greatly later in life.