#spending wisely

Started the year right by opening a build-up savings account. I now have 2 bank accounts; the first one is for emergency purposes and the other one is for savings.

I’ve learned that I have to save first and then think of something on where to invest my hard-earned money. No more unnecessary shopping, I should prioritize needs vs wants.

For many the concept of saving money is easy, but for others it can be a challenge. But when it comes to teaching our children how to save properly, we must rise to the occasion – as the financial security of their futures depend on it. It’s not only important to start teaching children how to save – it’s also critical to help them adopt a positive attitude about saving. 

Some months ago, Mindy Mercaldo, a 25-year veteran of the banking industry and colleague at Citi, shared some of the tips she uses to teach her daughter how to save, which I’ve curated below:

1. Take a family trip – to the bank. Open a saving account for your child as a family.  Making them a part of this process will allow them to ask questions and get firsthand experience interacting with a banker and the banking process. 

2. Help your child set goals. Has your son/daughter been asking for a new video game or toy?  Encourage your child to save their money, so they can purchase the item for themselves. Setting short-term financial goals is a great way for your child to start saving, as it also creates the perfect opportunity for your child to learn the value of money. Make it fun by creating a board together to help them track their progress. Long-term goals such as college or a new car (if they’re older) may take some time to reach, but you should still encourage your child to start saving if it’s something they really want.

3. Give your child ways to earn money. Saving is an act of responsibility. It takes focus and determination, but most importantly, it takes currency. If your child is under the legal working age, give them responsibilities around the house that will allow them to earn and save some money – something outside of their daily chores – like helping you cook dinner, watering the garden, or washing the car.  For younger children, tasks can be simple, such as feeding the family pet, getting the mail, or helping put away groceries. 

4. Reward your child for reaching their goal(s). Encourage your child to set a savings goal for one year, and then reward his or her achievement by offering a matching contribution. Think of it as being similar to how an employer matches your 401(k) retirement contributions. This not only compliments your child for a job well done, but it also provides a platform to discuss how investments and retirement plans work – a little early, but imminent.

Last week, educators, bankers and parents from around the US came together to celebrate Teach Children to Save Day, an effort dedicated to teaching kids about the importance of saving. I’m a huge proponent for teaching kids to save wisely – but if we want them to live a financially balanced life, we also need to give them first-hand experience with savings’ other (and, some might argue, better) half: spending. Because, as I learned at a recent family get-together, spending regrets often leave a lasting impression.

Let me set the scene. I was at a family BBQ and was informally “polling” family members about their financial regrets as fodder for a blog I was writing. To open the conversation, I shared my biggest regret, which was cashing out a 401(k) when changing jobs, early in my career. My then 14-year-old niece and 13-year-old nephew didn’t quite get what I meant, so I translated it as “I took everything I had in a savings account and spent it on stuff.” They immediately said it was really stupid and asked how I could make such a mistake when “you are so smart.”  True enough!

My niece then opened up about her biggest regret: spending $10 on some funny sunglasses, which she only wore once. “What a waste,” she exclaimed. My nephew’s big regret was buying a pair of flip-flops without trying them on. He lamented, “I got home and they didn’t fit. I couldn’t return them. Big mistake!”

So what did we conclude? If you stop and think before you spend, you’ll have fewer financial regrets and a lot more happy financial memories.  But in order to build financial muscle, you have to exercise. So parents: the sooner you give your children the opportunity to exercise financial choice, the stronger that financial muscle will be in adulthood – when it could be $10,000 (rather than a $10 pair of flip-flops) on the line.