CNN asks some money experts for tips on how to teach kids about personal finance. Laura Levine, the executive director of Jump$tart Coalition for Personal Financial Literacy, says she uses a special piggy bank for her 3-year-old son—it has four chambers, “one for saving, one for spending, one for donating and one for investing,” and helps teach him that money is not just for “one thing.”
Other tips are a little more traditional, like have your kid write down everything he spends money on, or save his allowance for a special purchase, or—and this is probably the biggest stumbling block—lead by example:
Parents can help with the basics, but a lot of them also lack financial education, Levine said. She added that where parents can be very helpful is in giving their kids their first lesson about money.
There are concerns that parents aren’t setting a good example for kids. The national savings rate has declined since 2001.
“Today’s kids, just like their parents, are coming up in a spending culture,” Levine said.
The most important thing for a parent is to make sure that their child’s first savings experience is a successful one, she said. Too many people try to get their kids to save for things that are too far into the future or too big. For a young child, saving for next year is an eternity, she said. If the goal is intangible, the money will seem lost to the child.