Teach Kids To Save Through Setting Goals, Otherwise It’s Not Really Saving


July 9, 2019

Kids accumulate money in many ways: cash birthday gifts, allowances, and lemonade stand earnings. Regardless of how they get it, setting aside a portion of that “income” is a great habit to practice! But the simple message of “save money” isn’t actually enough. “Goal-setting” is one of the most significant skills you can help them develop to save more and save smarter. Here’s why:

When it comes to savings, goal setting give them the necessary motivation to stay on track.

It’s so, so important to come up with a definition of success. Does “saving” mean putting away money for their college education, or for an outing at the end of the month? Or is it for a new bicycle? In order to be motivated, your kids need to be looking forward to something. Saving “as much money as possible” may seem like a recipe to save a limitless, constantly growing sum. But without a specific goal, kids will lack the kind of drive that only comes with a specific target. (They can always have multiple goals, or set new goals when they reach the current one.)

The more specific their goal-setting is, the more attainable their dreams seem. 

If your kids have a savings goal (new toy or videogame), they can calculate an exact dollar amount target for it. Though it may seem counterintuitive, choosing a maximum goal to reach is smart. Saving “enough money to pick something out at the toy store” is elusive; saving $20 for that stuffed tiger in the toy store window is achievable. Assigning a dollar amount to a goal makes it seem within reach. 

They’ll be able to realize when their savings are out of balance, or when they’ve been surpassed.

As kids get older, they may start saving for bigger purchases: a new bike, a trip with their friends, even college. While saving for these bigger goals may mean contributing constantly over months or even years, smaller goals are achievable in shorter time periods. Breaking down large goals can help kids feel successful and more motivated. For example, dividing a big “college” goal into specifics like textbooks, tuition, housing, and miscellaneous could be useful.  

Also, dividing up a big “lump” of savings into goal-oriented categories may make them aware of other savings categories. There may be types of saving they’re not thinking about. Are they planning far enough in advance for the next sports’ seasons equipment, or all those extra ice cream trips they’ll make this summer? Are they checking every box? Help them think about all their potential savings goals and then prioritize.

A goal will help them determine where they keep their money.

What they do with the money they’re saving depends a lot on how they’ll eventually use it. If they’re saving money that they might need to access in the short-term—like a short-term goal of a new toy or special treat in a couple of weeks—they’ll want to keep that in a piggy bank or maybe a checking account. But for a far off goal like a college fund more factors need to be considered, like how much financial aid they will need (this determines how many assets should be in their own name), whether to invest the money in CDs (which don’t make much these days), or in a 529 college plan, which has its own limitations. 

Keeping goals in mind helps them weigh short-term trade-offs against long-term gain.

Having a tangible goal in mind allows them to better weigh the trade-off of spending money in the short-term versus getting the payoff of the bigger goal they’re saving for. If they have two options—”saving $10” or impulse purchasing a coloring book—the coloring book is the more vivid, tangible option. But they’re less likely to buy something random if the alternative is specific, like the next book in their favorite series. 

They give kids a timeline—a proverbial “there’s a light at the end of the tunnel.”

In addition to having a target dollar amount and usage goal, kids can make a timeline for how long it will take to reach it. They’ll know how long they’ll have to make short-term spending sacrifices in order to put money aside for this goal. There’s a light at the end of the savings tunnel, and they’ll know when they’ll reach it. (This also allows them to set incremental weekly or monthly mini-goals to reach.)

Goals allow them to track their incremental progress.

It may be weeks, months, or even years before they reach their target dollar amount for savings. But that doesn’t mean they can’t reach mini-goals in the meantime. If they use online banking or money management apps, they can often input specific savings goals and use tools and charts to track their progress. 

Setting goals means they get to celebrate achieving them!

Though the waiting part of delayed gratification is important, actually celebrating their successes is important, too. If your kids reach a goal, celebrate it! 

When you talk to kids about healthy savings habits, be sure to discuss how setting specific, achievable goals is essential. Especially for kids still developing patience and big picture, long-term thinking, goal-setting will provide the structure necessary to stack on track. 

Article by Katie Simon

Katie Simon Katie Simon is a writer whose work has appeared in The New York Times, Business Insider, The Washington Post, BuzzFeed, and elsewhere. She earned a BA in creative writing and marketing at New York University and an MA in nonfiction writing at University of East Anglia in England. She is from Boston, MA.

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