Author Topic: How to teach a Five year told to save?  (Read 4462 times)

CTMommy

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How to teach a Five year told to save?
« on: November 16, 2014, 05:21:48 PM »
I'm a new Money Moustache reader and I'm looking for advice on how to teach my five year old son the importance of saving and delaying gratification. At this time he constantly asks for every toy he sees on TV (yes we still have cable, can't get my husdand to cancel it yet, although we will be cutting down to basic servce in Feb when our contract is up) or at a friends house. If he gets a gift card or money as a gift he wants to run out and spend it right away. It doesn't help that we live in a very affluent area on a modest income and many of the kids he goes to school with have iPads, multiple family homes, take more than one yearly vacation to places like Disney or the Caribbean. He goes to a private religious school and this is very important to us and the school is very focused on community service, but I can't help to feel that it exposes him to a level of affluence and consumerism that we can not replicate even if we wanted to. What I want to do his help him "work" for example help family members or neighbors with chores like cleaning up their yards, shoveling snow, or feeding or walking pets. I would go with him of course. He would charge a small fee and be allowed to keep half the money to spend and I would have him save the rest in either a college savings plan or savings account. I would love over time to help him look at his savings grow in both principle and interest and hope that having to spend his own money for things like toys and video games make him consider his purchases more carefully.  I also think that I could incorporate math lessons, like if he wants x toy for $15 and he has $8 how much more does he need to earn? Do you five years old is too young I start teaching these lessons, I feel like I will be criticized for putting my Kindergartener to "work" but of course I would not charge him for things like food or room and board, he would only be responsible for his "wants" and saving half his money for a future goal like college. Thanks for any suggestions you have.

GizmoTX

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Re: How to teach a Five year told to save?
« Reply #1 on: November 16, 2014, 06:01:55 PM »
I'd keep it simple. To teach delayed gratification, he needs a bigger yet more attainable goal to shoot for. Use his request for a toy as a teachable moment: why does this toy appeal to him & why does he think he wants it? Will it hold his interest? Is it durable? You are teaching him to how to evaluate all those choices seemingly available to him & his friends. Encourage him to pick something he's figured out that he really wants, & show him how it's attainable by saving & working. Often little kids are really excited about being able to buy anything -- show him how to turn his money into something more worthwhile to him.

Some parents match or increase the amount that their child manages to save over time, demonstrating the power of compound interest. We didn't do this, but sadly real bank accounts haven't paid interest for a long time.

As for saving half for the future, to a 5 year old, "college" is something a lifetime away. This can muddle your lessons of delayed gratification to the point where he might figure it just takes too long for the here & now. An older child who has mastered saving & working towards the future will better understand this concept, plus he'll be able to earn more.

The "affluenza" factor is something we really worked on. We became FI before DS was born, live in a nice house, sent DS to private schools, & didn't want him putting on airs or getting everything handed to him. He had a limited allowance for chores, had to work for more, & we never gave him handouts. He's 21 now & we're thrilled that he works hard & is very frugal.

bogart

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Re: How to teach a Five year told to save?
« Reply #2 on: November 16, 2014, 08:45:48 PM »
I can tell you what we've done, though I don't know if it will answer your question.

I'll note that my brother and I were raised with exactly the same system (as each other) and I grew up very conscious of money and saving, and my brother was much more, er, carefree.  And the same is true of my now adult stepkids (they were raised under exactly the same system of rules as one another) and my stepson grew up very good with money and my stepdaughter it took her a long time and a number of pretty big mistakes to get things right.  So -- I don't know how easy this stuff is to shape.

Basically, myself and my brother, and then my stepkids, and now my own son (7) all get a weekly allowance for which we/they have to do, well, nothing.  It's just spending money, and it's pretty modest -- my son right now gets $3/week, and that will go up about $1 every 2 years, I think.  As kids we did have to buy our friends' birthday presents, if we went to a party or whatever (and my son does this now), and also to cover some other expenses (I had to pay 1/2 of athletic competitions I wanted to participate in), though my sense is this was more case-by-case, i.e. I doubt very much my parents would actually have not supported my participating in sports, but they knew I very much wanted to do them so it was easy to use them as a tool to get me to save and plan.  We also had opportunities to earn (additional) money, though not so many at an early age, of course.  We were allowed to spend (or save) our money pretty much however we wanted with no rules about how we did it, though when we opted to save longer-term, we got praised for that (e.g. I got a paper route at 11 and put $10 of my roughly $30 income each month into a savings account and knew that my parents thought that was a good thing to do). 

My son isn't great about working, but he is great about saving and rarely wants to spend his money on anything (in contrast my nieces, who, again, are being raised by the same rules as each other, one is a total "saver" and the other is a total "spender.").  Part of the problem may be that I'm not willing to overpay my son by much for the work he does, and he just cannot do that much right now.  But also, I want him to understand that by far the best and most important thing in his life for now and the foreseeable future is his schoolwork and that if he is putting effort into that, his dad and I will take care of the rest.  Obviously this does not include Disney vacations (but it does include European vacations, as we have family there), and I don't run around buying him much in the way of toys, but he spends way less than he has available and is already conscious (for no obvious reason) that he wants to keep money in the bank, i.e. not to spend his account down too low.

I have to agree that college is a way too distant goal for a kid to appreciate.  I think if I were going to insist on saving for a longer term goal it might be to have money to spend while on a vacation (if your family takes them), or for a bigger (but current) goal such as an expensive toy.  Though honestly this isn't the approach we take, i.e. we certainly talk with our son about the pros & cons of spending versus saving but he is allowed to do what he chooses.

Sorry, this has been a rambly answer, but I'll go ahead and post it in case there is something useful somewhere in here.

CTMommy

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Re: How to teach a Five year told to save?
« Reply #3 on: November 17, 2014, 06:11:03 AM »
Thanks for the replies.

GizmoTX I agree that college may be too far in the future for a five year old to get the benefit of saving from, but I do like the idea of helping him analyze his purchases and make better decisions as to whether it is worth it to buy something. He does have good idea of what college is because we live in a "college town" and I have a cousin in nursing school but I definitely see your point of how saving for a goal so far away could discourage him. I liked your term affluenza, describes perfectly what we are dealing with. Glad your son is a hardworker and is frugal, that is what I want to try to cultivate in my own son.

 Bogart, I was raised in a similar system, my brother and I received an allowance $2 per week starting at age 5 just as being part of the family. But we did have savings accounts that we put half our money in. I saved even more than I had to saving birthday money, ect to buy savings bonds or put more into my savings. My brother (autistic so it is really comparing apples to oranges) spent most if his money but had the base line 50% savings rate. I do think that at there is an in born tendency to be frugal as the examples you gave of family members that grew up in the same money system having opposite attitudes towards money illustrate.

Mark31

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Re: How to teach a Five year told to save?
« Reply #4 on: November 22, 2014, 03:25:36 AM »
I have five year-old who doesn't really save, but it doesn't worry me. They live so much in the moment that the future is pretty vague and even if they want something it can be supplanted quite quickly.

I concentrate more on value and patience. He spends most of his small pocket money on second hand Goosebump books, and when he's shopping I'll suggest that a price is too high for the quality and that if he looks in other shops he's bound to find the same title for less. I'm getting there.

My eight year old doesn't really save either, but I've seen how he plays Monopoly or withstands a hard sell from a developing world stallholder, and I don't have any concerns about how he's going to turn out money-wise.

Does your child have anything he wants (where the want lasts longer than a day) that costs a lot? Like a large Lego set? This could be a useful goal.

Does the money he gets from gifts swamp anything he could make working or get from pocket money? Because that can make it difficult to feel the point in saving.

Is peer group pressure actually a problem? Of course he can't afford an ipad or second home with his income, but are there other items? I found five year olds generally accept a "that's not what our family does/buys" line.

We put half the pocket money into a savings account, and let our kids know that they can have half of that at the end of the year, and they like thinking about how much the stash is growing and that makes them feel good, so hopefully that might lead to non-compulsory saving as well.

tofuchampion

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Re: How to teach a Five year told to save?
« Reply #5 on: November 23, 2014, 01:58:57 AM »

Does your child have anything he wants (where the want lasts longer than a day) that costs a lot? Like a large Lego set? This could be a useful goal.

+1.  My son didn't ever save until he decided he wanted a Nintendo DS.  He did extra chores to earn the money, and it took about a year for him to accumulate $70, which then paid for a used DS and one game.  During the saving process, whenever he'd want to buy something frivolous (almost always a cheap toy from the Target dollar section), I'd remind him that buying it meant that much less money for the DS.  He almost always decided against the toy.

He's a bit older than 5, though.  He's 9 now, bought the DS a year ago, starting saving 2 years ago.

Still, having a reason to save was the first thing that got him saving.  Could work with a 5-year-old as well, though probably with something that won't take a year to save for.

Paul der Krake

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Re: How to teach a Five year told to save?
« Reply #6 on: November 23, 2014, 05:46:53 AM »
Some parents match or increase the amount that their child manages to save over time, demonstrating the power of compound interest. We didn't do this, but sadly real bank accounts haven't paid interest for a long time.
Even if there were accounts that offered "real" gains, it still wouldn't make an impact in a young child's mind. Great, if they wait one ENTIRE year (which is like a decade to children), their $50 will turn into $55. Offer to turn the $50 into $100 and you have their immediate attention.

MaryByrne

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Re: How to teach a Five year told to save?
« Reply #7 on: December 29, 2014, 03:42:11 AM »
Find books at his age level about saving money I thought of Red Fern Grows (5th grade level a bit high) where the main character works all sorts of ways picking berries, selling worms to fishermen... to save up for 2 hunting dogs. I loved/love A Chair for My Mother where the girl and her mom save up for a new chair after their house burns down. This article lists that book and a few others http://money.usnews.com/money/personal-finance/articles/2013/07/24/the-best-childrens-books-for-money-lessons . And a book called The Hundred Dresses described on wikipedia http://en.wikipedia.org/wiki/The_Hundred_Dresses though I'm not sure if a young boy would be interested in it. However I'd say try it because he could find he wants to be a fashion designer or something related. Double duty of getting reading time and lessons about money. I think starting an allowance is awesome ( I used to save quarters and coins) it doesn't have to be big just enough to show that collecting money end up with a lot to spend on something worthwhile.

mm1970

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Re: How to teach a Five year told to save?
« Reply #8 on: December 31, 2014, 09:39:49 AM »
still trying to get my 8 year old to save

Peacefulwarrior

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Re: How to teach a Five year told to save?
« Reply #9 on: January 11, 2015, 05:04:50 AM »
Read this book. It will give you all the answers you are looking for. Both regarding the concrete concept of money and how to instill contemptment in your children from an early age in order for them to grow the right values instead of only having the head knowledge. It's pure gold.

sheepstache

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Re: How to teach a Five year told to save?
« Reply #10 on: January 11, 2015, 06:38:32 AM »
I feel like the ideas about teaching delayed gratification are the best you can shoot for at this stage.

You know that marshmallow experiment? That also seems like a good teaching tool to me. Give the kid a marshmallow. Tell him(her) if he still has it in 15 minutes, you'll give him a second one. Rather than teaching a specific habit, you're giving him the training in controlling his own impulses to achieve the goals he wants. Alternately, you'll find out he's one of those kids who HAS to eat that marshmallow RIGHT NOW, and learning this about his temperament early on will help you.

The other important insight provided by this type of experiment is that the reliability of the reward matters, that the perception of the reliability of the reward plays almost as big a role as the ability to delay gratification. Your behavior has to be consistent. If you say, 'We'll buy that for you for Christmas if you still really want it then," you have to follow through on that. If you say you'll match whatever he saves, you have to follow through with no delays or additional conditions, etc.  Good description as well as a pdf link to an updated study regarding children's "assessment of environmental stability": http://www.joshuakennon.com/new-study-finds-the-ability-to-delay-gratification-correlates-with-the-reliability-of-adults-in-a-childs-life/