How To Help Your Children Increase Their Savings

posted by Andrea | 10/22/2019

help your children increase savings

Have you ever wondered how to help your children increase their savings or manage their money? Or maybe you’ve waffled back and forth about the concept of an allowance? 

If so, we’re in the same boat! 

Dave and I frequently discuss what might be the ‘best’ way to help our children manage their money, increase their savings, and become good stewards of their financial resources. 

However, since our children are still fairly young, it’s difficult to really present these concepts in a way they understand (at least it has been for us). 

We definitely do not have it all figured out!

We DO have a simple 3-part plan in place that has helped to increase our children’s savings accounts, offer a small amount of money-management education, and give them just the “right” amount of financial freedom for their age and ability.

Best of all, it’s almost all done automatically (which means one less thing we have to remember every month)! 

This post may contain affiliate links. Read my disclosure

child's cash register

PART 1: An Automatic Monthly Deposits in Their Savings Account

Every month, on the date of their birthday, we have an auto-transfer set up to deposit a specific amount of money into each child’s savings account. 

For example: 

  • $7 goes into Nora’s account on the 22nd of every month (she’s 7 and her birthday is November 22)
  • $5 goes into Simon’s account on the 4th of every month (he’s 5 and his birthday is March 4)
  • $4 goes into James’ account on the 14th of every month (he’s 4 and his birthday is July 14)
  • We don’t’ have an account set up for Clara yet — we do this when they are 4.

This is all done automatically and electronically so it requires ZERO effort on my part. I just have to remember to increase the amount by $1 every time they have a birthday.

The kids know about this money and are excited to look at their bank statements every month, but they also know this money is not really theirs to spend right now. 

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Part 2 = A Small Weekly “Allowance”

I hesitate to say that we give our children an “allowance” because that term usually implies the children work for the money — and honestly, our children really don’t do anything specific for this weekly allowance. 

As I shared last week, our children have a set of basic expectations they follow as part of our family… things like: 

  • taking their shoes off when they come inside
  • washing their hands regularly
  • putting their dirty clothes in the hamper
  • bringing their dishes to the counter after a meal
  • emptying their backpacks and lunch boxes when they arrive home from school
  • making their beds every morning
  • etc. etc. 

It’s actually a fairly long list, but in my opinion, they aren’t “chores” — and they don’t warrant a payment.

HOWEVER, if we want our children to learn to manage money, they need to have money to manage (tricky how that works!) so Dave and I have decided to give the older 3 kids a very small, $1.00 weekly allowance. 

As I mentioned above, this is not a payment for doing anything in particular. They get their dollar no matter what. It’s more of an opportunity for them to have an “income” and be able to spend some money when and if they decide they want to buy something. 

The kids also get 50% of the profits whenever I sell their toys or clothing on Craigslist or Facebook Marketplace (I get the other 50%). This is a VERY good incentive for them to purge more regularly!

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children's money banks

Awhile back, we gave each of our children a mason jar money bank that they keep in their bedrooms (these are the slotted lids I use).

Any money they get throughout the year goes into these jars — birthday, Christmas, Craigslist, their weekly dollar, etc. 

They may spend as much or as little of this money as they want throughout the year… HOWEVER, we have special savings incentives that has been fairly effective (see part 3 below)!

NOTE: Since I don’t want the kids to carry money around every day, I purchase items for them and they pay me back when we get home.

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Part 3 = A Yearly “Matching” Incentive: 

As I mentioned above, our kids know they can spend any money in their jar throughout the year. 

They also know that every year on their birthday, we take all the money out of their jar, count it, tithe 10% (we help them choose where and how to tithe), and buy something they wanted (but didn’t get) for their birthday.

The rest of the money will go into their bank savings account and Dave and I will MATCH that amount! 

The more money they save throughout the year, the more money will eventually get matched by mom and dad — resulting in significantly more savings on their end!

Although it’s not always effective, this incentive helps them to think a little more long-term about their money. 

little girl with a bank checkbook

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Our hope is that by providing the ability for them to spend their money at any point throughout the year, they will slowly learn to manage their small amount of “income”. 

At the same time, we hope the idea of matching money from mom and dad will encourage them to strive for more savings all year long.

 

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It’s not a perfect plan — we’ve already tweaked it a bit over the years, and I’m certain we’ll continue to modify it as our children get older and wiser with their money management. 

For now, however, it seems to be working well though. 

Plus, the only “hands-on” part for us is to remember to give them their dollar every Saturday (they always remind us too!) 

little girl holding a dollar bill

I’d love to know… How Do You Help Your Children Increase Their Savings? 

Do you (or did you) use an allowance? 

If so, what was the allowance for?

Do you have any sort of auto-deposit in place?

What do you allow them to use their money for?

NOTE: this post about How To Help Kids Handle Money has TONS of great ideas in the comments! 

help your children increase savings

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Filed under: FamilyParentingChildrenFrugal Living

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26 comments

  1. Melinda

    10/24/2019

    Hi Andrea,

    how old were your kids when you started giving them their weekly dollar?
    Our sons are 5 and 3, and very much interested in money and paying in the store.

    [Reply]

    Andrea Reply:

    Hey Melinda,
    Our kids were 4 when we started — We open a bank account with them at that age, so it all sort of goes together:)

    [Reply]

  2. Amy

    10/23/2019

    We have done allowances for years. Now that they are older 12 and 14 -This year for back to school shopping they each had a budget for clothing. We went over a few needs before they went shopping to make sure they knew some have to gets, but other than that they could make the decisions. I think it was a good life lesson and a ton easier on me – I didn’t have to say no to anything, if they decided they wanted something I told them how much they would have left after and what was still on there list. They also started paying much more attention when we were at Marshalls/TJ Maxx and a few thrift stores. 🙂

    [Reply]

    Andrea Reply:

    this is a great idea Amy! Thanks for sharing.
    I will tuck it away for a few years from now when my kids are a bit older 🙂

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  3. Jennifer

    10/23/2019

    We have a few different things going for our five year old (only child). We do an automatic monthly deposit into a savings account for him that he doesn’t know about yet. We aren’t entirely sure what this money will be used for. Maybe a gift for when he leaves home, maybe as part of a fund to help him buy his first car.
    We have a 529 investment that his grandparents contribute to. We put in a lump sum this summer and I think that will be it for our contributions. We will expect him to work to pay for part of his college expenses, but this will most likely cover a large portion.
    For cash and money management, we really like Dave Ramsey’s Financial Peace Junior and his book with his daughter, Smart Money, Smart Kids. It’s commission-based which I think is interesting. Our son received the kit for Christmas and he really enjoys it!

    [Reply]

    Andrea Reply:

    cool — I didn’t know there was a financial peace Jr. Thanks for sharing!

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    Jennifer Reply:

    You’re welcome!

    [Reply]

  4. Carrie

    10/22/2019

    I have a related question. How do you handle your children buying gifts for their siblings for birthdays or holidays?

    [Reply]

    Carrie Reply:

    Or gifts for birthday parties or other relatives

    [Reply]

    Andrea Reply:

    they have a little “love bazaar” at school where everything is $5 or less. They buy gifts there each year. Other than that, we really don’t have them buy gifts yet — and Nora is the only one who has ever gone to a friend’s birthday party.

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  5. Ann

    10/22/2019

    We don’t use the word “chores”. We say they are family contributions. And our allowance is not tied to them in any way. As our boy gets older, we require him to pay for more and more things so his allowance also increases. He learns money management and making choices and we would have spent the money either way. Giving him control fills his power bucket! Our only requirement is that when he gets his allowance, he splits it 3 ways (Spend, save, give). He gets to determine how much goes to each one. Sometimes I am surprised. Like when he opted to put the $10 he got for his birthday in “give” because he had enough already. Sometimes I can predict the way he will split it up. Every few months we make a trip to the bank for him to put his save money in there.

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  6. Roxanne

    10/22/2019

    I’m a fan of the book “Prodigal Sons and Material Girls” by Nathan Dungan. It was originally published in the early 2000’s so some of the references are kind of dated, but his approach of “share, save, spend” (in that order) is a good introduction to the different ways money can be used to live out your values!

    We’re going to get our 6 year old set up with a bank account later this fall. He’s very excited about it 🙂

    [Reply]

    Andrea Reply:

    ok thanks, Roxanne — I’ll look up that book!

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  7. JJ

    10/22/2019

    These are great ideas–and very doable! We take 30% of financial gifts they receive and put them in their savings. I also wanted to share this. I had never thought to get them something used for their birthday. In my mind, it had to be new to be a “new” gift. But your blog has helped me see that it can be “new to them”. My dad had given my son $100 for his birthday, which meant $30 went into the bank. $70 for a bike would have used ALL the money. I saw a bike on clearance at Walmart and went back to get it. It was $58. Well, it was gone. So I went to a huge consignment sale. A spiderman bike was right in front when I walked down. It was $25!?! So he ended up with a Mickey Mouse hoodie(also from the consignment sale), a Mickey Mouse shirt, a bike, and a couple of other things with all of that extra money. I haven’t always had the best luck with used stuff, so I have always hesitated. And my son has a dog dander allergy, so I have to be careful about things with unreachable places to clean, etc. But this was perfect!!! You inspire me!!!

    [Reply]

    Andrea Reply:

    this is awesome — way to stretch that birthday money!
    I honestly don’t think our kids care AT ALL if they are getting used versus new gifts.
    I just found Simon the exact pair of UnderArmor high-top shoes he’s been wanting for $15 on Craigslist (normally $60). He’ll be SO excited when he opens them at Christmas this year 🙂

    [Reply]

  8. Amy B

    10/22/2019

    Our to oldest get an allowance/get paid for doing extra chores above and beyond regular household expectations. We pay $.75/year of age, and they have 4-5 chores assigned to them. If they choose not to do chores, they don’t get paid. We try to set it up like a real job, where if you don’t work, you don’t get paid.
    We also give sick days
    They give some, save about half and have about half to spend. They usually save up for a bigger toy like a Lego set or to have spending money on trips.
    A great book we’ve used is “Smart Money Smart Kids” by Rachel Cruze and Dave Ramsey.
    I love the idea of auto transfers monthly

    [Reply]

    Ashley Reply:

    Love this book too!

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    Andrea Reply:

    thanks for the book recommendation, Amy!

    I’ll add it to my growing library list 🙂

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    Ann Reply:

    Like this book too!!

    [Reply]

  9. Rhonda

    10/22/2019

    You’ve mentioned the auto-savings deposit before – so I started doing that for my 6 and 9 year old kids a while ago. I also have been selling their toys, etc and I like your idea about 50% profit for them.

    My parents never gave me an allowance, but back then (in the 80’s) I don’t remember asking for much to buy – maybe because stores/malls were pretty far away, so out of sight, out of mind! I also started working (babysitting) at 11 years old. I was one of the few in our rural neighborhood, and I was busy! I think I had at least a couple grand saved by the time I was 13. I’ve always had a “savings” or “frugal” mentality – I guess it comes a little from my parents, but I think it’s also just my “nature” (vs “nurture”.) I don’t really remember them teaching me about it, other than my mom did help me open a checking account at a young age (early teen) so I could learn to manage it.

    [Reply]

    Andrea Reply:

    yes, the auto-savings is super nice (and SO easy). And the 50% for purged and sold items is a big deal around our house. They are much more willing to purge this way!

    [Reply]

  10. Brenda

    10/22/2019

    My kids are older: 12 & 8. They get an allowance ($10 & $5, respectively). We have decided that going to school and helping at home are their jobs (just like mom & dad have jobs to go to) and they should be paid for maintaining their jobs. Their allowance is weekly, but they they get paid when I get paid (every 2 weeks). They are responsible for paying for their own little school things: popcorn/cupcake Fridays, pencil vending machine, dance fees (for the older one) and any un-necessary desired items, and any extra lunch money they want to spend over what I give them. This helps them realize they have to earn their money (theoretically, if they don’t’ do well in school, they may lose some allowance, but it hasn’t needed to happen yet) and save for what they want to get.

    It has actually worked. A few times they really wanted a candy bar from the gas station, but when I asked if they wanted to spend their own money on it they changed their mind. And the younger one bought 6 iced tea drinks one time (approximately $10) and then regretted his choice a few days later when his teas AND his money were gone.

    It has also helped them understand why I make some of the decisions I make. For example, we only get waters when we go out to eat because pop for 6 people adds up fast. I asked them if they wanted to pay $15 of their money so we could all have a glass of pop. They decided that water was fine, haha.

    [Reply]

    Rhonda Reply:

    I think that’s fantastic. Better to “fail” at a young age buying the $10 worth of iced tea. I bet the 8 year old will remember that for years to come!

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    Andrea Reply:

    exactly!

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    Andrea Reply:

    ah — don’t you love it when something you put in place actually works 🙂
    Sounds like you have a great system going for your family. Thanks for sharing how it works!

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    Ann Reply:

    Nice touch of paying for all to get pop! I wouldn’t have thought of that and they would have gladly spent $3 for a pop for just them!

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