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, and even being polite. But as parents, we especially need to help our kids make good financial decisions as they get older. You’re never too young to start learning about financial responsibility and the importance of saving.

Here are some simple steps parents can take with their kids to get started!

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, aside from birthday and holiday gifts, is to have 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 their age (i.e., a 5-year-old gets a $5 allowance), then increase it 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 to use a clear container so that 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. No one can open a savings account on their own until they turn 18, but a parent or legal guardian can have joint ownership with their child and help them manage it until their 18th birthday. We suggest setting up the RiverWind Regular Savings Account together. You will need to bring some paperwork with you: your child’s social security card and birth certificate, as well as your social security card and picture ID. 

Additionally, you’ll need an initial deposit: have your child hold and count out how much money they’ve earned and how much is going into savings so that they can be involved and excited about what’s happening. Make sure you take your child with you on your trip to the bank–it could be a new and fascinating experience for them, plus handing the cash to the bank teller is a thrilling feeling.

One last thing on this: keep your child involved. Let them keep storing money in their piggy bank, and then make regularly scheduled trips to the bank to deposit their savings. Make sure they understand interest so they can stay motivated, knowing their money will grow if they don’t touch it. Let them see the money in the account grow, and keep a checkbook together where you can keep track of things with them.

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, a charity, or even someone they know who needs a little help, let them choose who to donate 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 in their minds 

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, don’t offer to pay 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.

Your kids may not care much about bank statements, interest, or savings now, but as they get older, they can become increasingly involved in managing their accounts and developing good financial habits. As they start their first jobs and learn about taxes, or have their first email accounts and are aware of financial scams and schemes that seem too good to be true, you’ll be reminded that all the lessons you taught them weren’t for naught. By starting their financial education early, they’ll gain both confidence and savvy when it comes to making sound decisions.