Back to Saving
Over the past few weeks, kids across the country packed their backpacks and headed off to start the new school year. I still remember the mix of excitement and apprehension I felt as I laced up my new sneakers for the first day—they were the “special” annual back-to-school purchase in our family. The preparation for school may vary between households, but it can be agreed that every parent wants to set their children up to succeed. While there are many factors that may be out of a
parent’s control, teaching kids good financial habits, like saving, can give them the best opportunity for a financially stable future.
To help kick off the school year, Feed the Pig hosted a live Q&A on Kids and Money, with National CPA Financial Literacy Commission members Kelley Long, CPA and Clare Levison, CPA. Here are a few of the top questions and answers.
- What are some tried and true methods to help kids take pride in earning and saving for "big stuff," whatever that may be? If your child is younger, have him or her create a decorative chart to help track the progress toward their goal. Post it on their wall so they can update it each day or week.
- My son will start his first afterschool job next week. I'm unsure whether to continue to give him a weekly allowance. What do other parents do? What is your recommendation? I would end the weekly allowance unless he is truly doing things at home that you feel warrant payment (such as baby-sitting younger siblings, mowing the lawn, etc.). The average child with an allowance gets $65 per month, but what you decide to do will probably also depend on your family's personal financial circumstances.
- Should the money my child receives for babysitting and other afterschool jobs go toward a college savings account? How can I explain to her the importance of saving for college even though it's several years away? It's important for kids to have some "skin in the game" when they head off to college, so having her earn some of the money that will go to pay for it will definitely increase her chances of a successful college experience. Rather than having her put away ALL of the money she earns, consider letting her keep part of it to spend as a reward for the work. That way she'll stay motivated to keep accepting those baby-sitting jobs but will also be helping to defray the cost of her future education.
- How can we encourage kids to donate money? Which organizations do you recommend looking into? The reward of donating to a cause you believe in is a great value to instill in your kids! To get them into it, think about things that interest them and find a local cause that supports it. For example, if your daughter loves horses see if there is a horse rescue organization nearby, and then take her to see the horses she's helping. If your kids are older, have them do the research themselves. I worked with a family once who each year matched their kids' donations to a cause of their choice. One daughter picked a spay/neuter program because she learned about unwanted kittens being put down at the local shelter, and the other daughter chose an environmental organization after learning about recycling at school.
What are some common questions you receive from clients when it comes to discussing finances with kids? What advice do you give?
Claudia L. Cieslak, AICPA Staff.