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By Mary Wilson

Alabama Cooperative Extension Service

A penny saved is a penny earned. That’s just one money lesson parents and educators can share with younger generations on National Teach Children to Save Day, which is observed April 24.

For three years, Alabama Cooperative Extension System Agent Patricia Smith has educated hundreds of children and adults throughout northwest Alabama with her Power of Saving program. She said teaching children to be savvy savers starts with simple conversations.

“We do not always want to talk about money,” Smith said. “However, in the same way that children learn how to read, write and count, they can and should learn the value of money and saving. Children learn financial behaviors from their parents, whether good or bad. Practicing good financial behaviors sets an example for a child’s future behavior.”

Extension Personal Financial Management State Specialist Portia Johnson, agreed that parents play a vital role in establishing healthy savings habits for the next generation.

“It is good to start having money conversations about the concept of saving with children between ages 6 and 8. This is also an ideal time to start teaching kids about routine and responsibility,” Johnson said. “Small money lessons early in life help children have the foundation they need for strong financial knowledge, skills and behaviors later in life.”

Effective money talks should highlight what money is, how it can be used and ways to save.

Conversations with young children should start with foundational knowledge, which includes the definition of money as what is exchanged for items or services. Smith suggested using play money to help children practice counting and purchasing.

“After they’ve learned the basics with play money, a quick shopping trip is a great teachable moment,” she said. “Give your child a set amount of cash and allow them to shop for one item. Ask them how much it costs and whether the money they have is enough to buy it. You can even let them complete the transaction with the cashier. Even though they are spending, they have to understand this step first before they learn why it’s important to save.”

Smith said she teaches children there are three main uses for money: spending, sharing and saving. To encourage saving, she said it helps to explain the difference between wants and needs.

“Children may want designer shoes and clothing, fast food, the latest technology and toys, but they need to understand these are not necessities. They are extras,” Smith said. “Make a list of needs and wants. My favorite saying about the needs list is ‘If it’s not on the list, it doesn’t exist.’ Basic needs are shelter (including utilities), clothing, shoes and food.”

Parents can give children real-world money experience by providing an allowance when chores are completed or offering financial rewards for earning good grades.

“When your child earns money, challenge them to save 10 percent or more of it,” Smith said. “A focus on savings can make spending and sharing concepts come to children a lot easier. This teaching process must be intentional, steady and consistent. Building a habit of saving takes time, practice and patience.”

Once a child understands money and its potential uses, it’s time to find a place to stash their cash, like a piggy bank. During the Power of Savings workshops, Smith shows students how to turn a plastic water bottle into savings storage. She demonstrates that one bottle filled with dimes can have a value of up to $100.

“That always gets students excited and ready to save,” she said. “They understand they can start small, even with dimes, and grow big.”

When they are ready to go big, it may be time to head to the bank and set up a savings account.

“Several banks, credit unions and other institutions offer free Children’s Savings Accounts or CSAs,” Smith said. “It’s fun to review on-line banking or paper statements with your child to show how the money grows. I always tell people that time plus consistency equals growth. That’s true with a savings account as well as all areas of life.”

While saving money can be a serious topic, Smith said it’s important to keep lessons light-hearted.

“Parents who make saving money a fun, regular part of children’s weekly routines help their children build a strong foundation and brighter financial future. Over time, saving will become a natural part of their everyday life,” she said.

Smith and Johnson have shared even more tips to promote saving money in a publication titled How to Teach Children to Be Savvy Savers. Search for the article on-line at www.aces.edu.

Mary Wilson is a Communications Specialist with the Alabama Cooperative Extension System.