As summer unfolds and kids are embracing it fully during their break from school, it is an ideal time for parents to share a crucial life lesson: save your money. Whether they earn their money through allowance from chores or a summer job down at the local country club, creating the habit for them to spend sparingly can benefit them and prepare them for the unexpected.

happy parent holding piggy bank and teaching son save money.Photo byTom Wang/Shutterstock.

According to the American Bankers Association’s Economic Advisory Committee, the United States has a roughly 30% chance of entering a recession in 2024 or 2025. Now of course, the economic forecast can easily change similar to the weather, teaching children financial responsibility early on in life can equip them with the skills to navigate their way through the unexpected with ease.

Key Strategies To Teach Kids About Saving for Emergencies

To properly teach children about the value of saving for emergencies, involving these tips and tricks is important:

Set Clear Savings Goals:

Help your child set goals to save, whether it is for that toy they desperately wanted at the store, or a school trip, or for emergencies. By doing so, this will help them understand the purpose and motivation as to why they are saving. In addition, if the goal is to save for an emergency, help them understand that in order to be comfortable during hard times, at least three months expenses are necessary in the account. Of course, they don’t have a car note or a phone bill to pay for, but parents can also have children contribute partially to some bills that affect them, such as groceries, to create the “monthly expenses” expectation.

Using Saving Challenges:

Incorporate fun strategies for kids to make saving seem more like a game than a task. Kids can save a certain amount each week or even spare change. Although it will come off as a game, it instills discipline when it comes to managing their money.

Teach Budgeting Skills:

Kids don’t have to put their entire allowance or paycheck into their savings. Allow them to spend their money with a little bit of freedom. If they want that sweet little treat or want to see a movie with their friends, allow them, but only if it is within a certain percentage. The ideal amount for freedom spending is at least 30% of income. This is according to the 50/30/20 rule, which is 50% expenses, 30% wants, and 20% savings and debt repayment.

Define What a Savings Account Is:

Parents can introduce what a savings account is by defining what it is, which is a place to hold money that you don’t intend to spend immediately. Not only is it a place to keep unused money safe, it may also accrue interest over time.

The Importance for Saving for Emergencies

As the economic forecast is uncertain, saving for emergencies is important. Introducing this concept early in kids’ lives can help them understand the strategies and willingly want to save their money:

Building Financial Resilience

Saving money for emergencies can help with bouncing back and moving forward. Parents can easily explain ways about how without income, expenses just don’t disappear, and having that savings will build their resilience.

Encourage Financial Independence

A sense of financial independence and responsibility will not only empower kids to make informed financial decisions when times get tough, but also reduce the reliance on others. Especially considering nearly half (46%) of Generation Z relies on their parents financially, as parents we can only teach Generation A differently.

Promoting Long-Term Financial Habits

Establishing the practice of emergency savings early on in life will lay the groundwork for adult financial management. It encourages a lifetime of savings, budgeting, and future planning.

Practical Tips for Parents

Parents play an important role in teaching children about saving for emergencies, and as parents, we should raise them in the way we want them to be:

Lead by Example:

By discussing your own savings goal and strategies with your children, you can demonstrate responsible financial habits.

Encourage Open Communication:

This can be done by using real-life examples to show the benefits and/or consequences of having and/or not having an emergency savings.

Celebrate Milestones:

Just like you would celebrate winning an important sporting event or graduating from one grade in school to the next, recognize when kids master certain financial skills and achieve their goals. By reinforcing positive behavior with their savings goals, children will further continue their savvy financial habits as adults.

Conclusion

Overall, an essential part of children’s financial learning is to educate them on the importance to save money from their allowance or summer job earnings for financial emergencies. By applying realistic techniques and the early development of a saving habit, parents can provide their children with the confidence to face financial difficulties that may lie ahead. What they learn now will provide them with the knowledge they need to achieve financial security on their path ahead.

About Gregg Murset & BusyKid

The co-founder and CEO of BusyKid, Gregg Murset is a groundbreaking inventor, father of six, certified financial planner and consultant who is a major advocate for sound parenting, child accountability and financial literacy. He was named Financial Educator of the Year in 2017 and is featured in hundreds of media stories each year promoting improved financial literacy in schools.

BusyKid helps children develop a healthy financial routine they can carry into adulthood. With the help of parents, children use BusyKid to get the hands-on experience in making various money decisions, including how much to save, share, spend and invest. With pre-loaded chores and allowance based on children’s ages, parents can easily set up any kid account, and in minutes, and kids can be earning money. Payday is each Friday after parents check the work to verify that it was completed and approve a notification on the phone to ok the transfer of funds. After getting paid, children can save some money, donate some and use the rest to get cash or learn how to invest in real stock. Every child also has a personal debit card to use while parents can follow all transactions. BusyKid is available via Apple Store and Google Play. For more information about BusyKid, visit http://www.busykid.com.

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