With Lunar New Year fast approaching, children whose families celebrate the holiday can anticipate receiving a red envelope filled with money. A symbol of good luck and fortune, this red envelope can be a launching pad to having a conversation with your child about saving money.
Why should you save money? While this answer is obvious to many financially responsible adults, children may have a harder time grasping the concept.
“It’s important to teach children about money at a young age because it helps them develop a positive, healthy relationship with money in a way that can help them thrive as they get older,” says Carrie Gan, vice president and community partnership manager at East West Bank.
East West Bank partnered with nonprofit organization Operation Hope to provide a series of online classes designed to help children understand how money works. Daniel Navarro, vice president and branch manager at East West Bank, introduced the concept of saving money to a class of fourth graders.
“Who can tell me why people save money?” he asked the students. While some replied simply “to get rich,” or “to buy things,” others chimed in with more specific goals such as “to go to college” and “to not worry about money when you’re older.”
Saving money requires discipline and patience—qualities that can be hard to instill in a society of consumerism and instant gratification. As with learning any new skill, Navarro recommends having your children start with small amounts and gradually work up to saving more money. “You’ve got to start somewhere, and you want to make sure they feel good about it from the beginning,” says Navarro.
To effectively teach how to save money, Operation Hope says parents can help children to transform savings into a habit. The way to do that is to encourage them to take the money they receive and put it into savings first before spending. For example, saving $5 every week will add up to $260 by the end of the year. Teaching your child how to budget and cut expenses will also lead to better savings plans.
The objective is to show your child that prioritizing delayed gratification over spending money now can yield greater returns in the future. In the case of 5-year-old Kenzi Yuen, she’s hoping that her money saving will eventually afford her a puppy. “She’s been wanting a dog for a while now,” says her mother, Jodi Yuen. “So we’re teaching her how to save money to pay for the adoption fee.”
Working toward a desirable goal also helps motivate children to stay on course with saving money. Whether it’s the latest video game or simply buying a ticket to the movies, making the goal personally relevant and having their savings accumulate to positive end results will teach valuable lessons.
“We taught Kenzi how to save by creating a simple money box,” says Yuen. “Having an actual box where she can deposit money has been a game changer. Every penny goes into it, and she’s already halfway to her goal.”
Separating out short-term goals (such as buying art supplies, musical instruments or sports equipment), medium-term goals (smartphone or a new bike), and long-term goals like building a college fund or saving for a car can help organize the allocation of money.
“I want to share something very important—and I think this is key when it comes to finance,” says Navarro. “In life, there are going to be setbacks, and some of those can involve financial setbacks. Building character at a young age, having a good attitude and learning from those setbacks will take you far.”
Gan echoes that sentiment. “I wish I learned differently, but I learned to save money the hard way,” she says. “I made a lot of mistakes first, but ultimately, I learned by reflecting on the sacrifices my parents made and learning from their example.”
While money is a serious topic, it can still be discussed and practiced lightheartedly, especially with children. Many have had personal experience in earning allowances based on the number of chores completed.
“Money is definitely a good motivator,” says Yuen. “When I was young, my parents had me wash the dishes and mow the lawn to earn a few dollars. But the tasks were just so boring and monotonous.” To make the experience more enjoyable, especially during the pandemic with stay-at-home orders in place, Yuen has made it a point to teach Kenzi that she can cash in on critical thinking skills and innovation.
“It’s really another form of positive reinforcement,” she says. Instead of simply doing chores, Yuen gamifies the process and turns it into a challenge by writing clues on origami papers that she folds into animal shapes and then hides in various spots around the house.
“I have her look for and find the clues that gets her doing one small task that leads to another. If she can get to the end of the treasure hunt without any adult help, she gets to earn a few extra dollars,” Yuen adds.
Parents can also use apps like PiggyBot and Otly! to teach children how to save through games. PiggyBot is a virtual piggy banking app designed by parents intended to teach children how to budget, take pictures of things they want and set goals. Otly! is an app for both parents and children, where both parties can keep track of the money spent and saved. The app also features ways to purchase items and donate to charities online in a safe way.
The financial classes hosted by East West Bank and Operation Hope also encourage children to apply critical thinking and come up with their own financial solutions based on a topic. Classes are more than a lecture and instead filled with conversation and engaging activities. From short cartoon videos done by CashVille Kidz highlighting specific financial topics, to having more intimate discussions in breakout rooms between a smaller group of students and a financial expert, the curriculum is designed to pique children’s interest in money matters. Other free and educational money activities online include a number of different interactive games found on Math Blaster.
“Honestly, I wish I had learned about money when I was much younger,” says Roni Hayden, program manager at Operation Hope. “It’s really great that these young kids get exposure to these financial topics from East West Bank.”