A friend of mine recently shared with me one of the ways she encourages her children to save. Much like a 401(k) employer-contribution program, my friend's method involves matching the money her kids are willing to put away in accounts for future purchases.
I love this idea for so many reasons.
Right now my kids are little, earning very little. They get a dollar or two here and there for doing chores. Sometimes when grandma comes to visit she’ll give the $5 for making good grades. After they tithe 10%, they save 10% of what they have been given. This translates to increments of $.10-$.50. Watching this grow takes patience. Plus, if they are investing in short-term savings for something special it’s easy for them to get discouraged.
While I do want my little ones to practice growing their wealth little by little overtime, I don’t want them to get discouraged and lose interest in achieving their goals. This can easily happen with young minds and short attention spans.
Here are some things you will need to do before you get stated:
- Decide on the percentage of your child’s contribution you’re willing to match. Maybe it’s 100% percent for little ones and 50% for big ones?
- Determine a maximum amount you’re willing to contribute each month. As the kid’s get older they’ll likely increase their contributions. Your portion may become more then your budget allows.
- Choose what, if any, special projects you were willing to partially fund using this method. Are you contributing to their long-term savings or the iPad they’ve had their eye on?
- Once you’ve established what you will do, layout the plan for your kids in a way they will understand.
By matching what's put in your kids savings accounts, you can help your little ones stay focused on their saving goals. This will encourage them, knowing that you are walking along on the process with them. As the kids get older it may even motivate them to put aside more because they know it will provide a greater return than that pack of gum they’re tempted to buy.