The earlier you teach your child about respecting money, the better grasp he'll have on how to use it wisely. Avoiding a frank discussion about money, saving and spending will only add to the confusion. A piggy bank is a tangible lesson on the right way to save and spend money, and is an easy way to demonstrate the benefits of saving and what to do with spending money. Your child can use the piggy bank to allocate funds and learn healthy attitudes regarding finances.
Step 1
Bring your child to a toy store and allow her to choose two small piggy banks. When she chooses them herself, she'll be more likely to use them. You can even find ceramic unpainted banks and purchase acrylic paints so your child can decorate them how she wants. While a variety of high-tech piggy banks are available, plain, slotted piggy banks will do.
Step 2
Label one piggy bank "Spend" and one piggy bank "Save." Talk with your child about the importance of saving money to spend on bigger purchases that will take more funds, like education. Decide on a reasonable amount to save, like 30 to 50 percent of all funds. Instruct your child to place the savings away in the "Saving" bank while the rest is fine to spend on anything that he wants.
Step 3
Offer your child opportunities to earn money around the house, suggests ChooseToSave.org. This allows your child to learn about money as a valuable asset. When you offer a simple allowance without work, your child might not learn the value of hard work and how to save money that has been hard-won. Simple house tasks, landscaping and babysitting can earn money to be divvied between spending and saving.
Step 4
Calculate a small interest rate that you feel comfortable paying your child. Janet Bodnar, a financial expert for Kiplinger.com, notes that she pays her children a small interest rate on saved money. It gives a child an added incentive to place more money in the "Savings" piggy bank, and teaches the difference between small instant rewards and larger rewards that are won through hard work and patience.
Step 5
Bring your child to the bank at the end of each year to deposit the "Savings" piggy bank into a savings account. Add to the account the interest that you promised to pay and talk to your child about the added money. Allow your child to choose between saving the money in the account or spending it. Giving your child free rein to decide what to do with her money allows her to learn from mistakes and feel in control, notes the U.S. Department of Health and Human Services.
Things You'll Need
- Piggy bank
