Getting young children to save is becoming more difficult at a time it’s becoming more important. Chances are today’s elementary school kids are going to have to fund not only their own retirement, but also a large portion of their personal health care, insurance benefits, and more. They won’t be able to do that if they don’t learn the value of savings at an early age.
However, is it fair to tell a 9-year-old to save just because it’s good for her? Incentives matter, and the current low interest rates on savings accounts make it difficult to convince anyone — let alone young children — to save diligently. Here are some ideas for helping kids earn more from putting their money to work:
Sponsor a goal. Say your child wants a new bike. Agree to pay a portion of the cost if he’ll earn and save the rest. Make sure his portion is significant, though, so he can really see the value of saving for a specific goal.
Start a matching program. If your kid doesn’t, yet, understand interest rates and percentages, try a simple matching program to get her interested. Open a savings account for her and promise to match her contributions up to a certain level, just as the best 401(k) retirement savings programs do.
Become a bank. Banking basics are just as important as business basics. How about allowing your child to lend to you at an attractive rate? He’ll get a little extra cash, but more importantly learn an important lesson on the compounding power of interest.
Open a custodial brokerage account. History shows that investing in stocks beats investing in cash, especially over the long term. Look for a brokerage account that you can open with your child that is simple and low on fees, and allows minimal weekly or monthly investments.
Embrace the outlandish. Maybe your child wants to learn how to scuba dive, or take flying lessons. Consider the idea of accessing the previously unattainable as a reason to sock away cash.