By Shelley Bokman

Alan Greenspan, former Chairman of the Federal Reserve Board, once stated that, “Saving is the crucial issue for the long-term economic outlook of this country.” Yet by the time students finish college, 83 percent will already owe an average credit card balance of over $2,000. For the sake of the next generation who will lead this country of ours, we must reverse this alarming youth trend. Parents have the power to provide children with regular savings experiences at an early age and instill saving as a life skill.

Keep It Simple
The key to success is getting into the regular habit of saving and making it understandable and rewarding for youngsters. Very young children may have a hard time handing their money over to a stranger at a bank; they may worry that they will never see it again. Start with a piggy bank, or better yet, a clear container that allows your child to watch the money accumulate.

Have a Goal
While saving for college or a first car are honorable goals, they seem a lifetime away and are far from motivating for most children. Start with a smaller, more immediate goal. It could be a toy or a new sweatshirt that your child has been wanting. While the added college funds would be nice, your goal is to teach your child how to save. Even as adults, it is easier to save for next summer’s vacation than it is for your retirement years that seem eons away. Even if your child wipes out his savings and begins accumulating funds again, his efforts have been rewarded - and most important, the concept of saving is being learned.

A Real Bank Account
As children enter elementary school they will want to open a real bank account. Most banks will require that you co-sign or set up a custodial account for your child. Be sure that your child’s social security number appears on the account so that when tax time rolls around, any interest earned will be your child’s and not yours. Explain to your child how to make deposits and withdrawals. And when your child is ready, explain how compound interest works. The idea of a little bit of money growing into a much bigger pile of money is very motivating to some kids. Another incentive, especially for teens, is a system where you match part or all of what your youngster stashes away.

Make it a Family Affair
One of the biggest factors in your child’s success as a financial saver is your attitude. Let your child in on the family savings plan. What are you saving for, and is there a way they could contribute? Help your child figure it out. Even if you don’t believe in giving an allowance for household chores, find a way to access a little bit of money for your child to learn with. Babysitting, mowing the neighbor’s lawn, holiday gifts from relatives, or gathering loose change can all provide the little bit it takes to get started saving.

For the Older Kids
Setting a good example as a money-conscious parent is important, and as your child grows older, you may find it appropriate to start teaching them about some of the more mature financial decisions that they will need to make. For a pre-teen, or young teen, it’s a great time to have discussions about the stock market, savings programs, and even what and how to get sound advice, so they can make smart decisions. Before rushing to the broker, expand on your swift explanation of savings. Help your child understand the world of money by accommodating their reliance on tangible objects. You may want to take them to a brokerage firm and show them around.

“I feel like I am creating tomorrow’s millionaire when a parent comes in with their child,” says Heather Proctor, a senior financial advisor in Rochester. “There is no greater factor in their overall success in investing than starting early,” asserts Proctor.

Introduce them to the firm’s employees and let your child choose the company in which they would be proud to own a bit of stock. Their favorite toy company or fast food restaurant chain may be a great choice! With a newfound familiarity, the financial consultant/stockbroker is no longer a money-eating monster, but instead a person who may enhance their treasures.
After helping your child buy a few shares of stock, go on-line with them or use a newspaper to track their investments. By giving them a visual representation of the value of their stock on a daily basis, it allows them to become involved with their investment, giving them the control to check on it whenever they want.
While tracking ownership may give them a tangible understanding of their assets in the stock market, the idea of interest earned in savings accounts may still be difficult to understand. Because it may be paid on a frequency far too low for the education of children, it may be wise to add a bit of “interest” to their at-home stash. By understanding that their piggy banks “earn” money on a regular basis – let’s say monthly – they may learn that by saving more money, they can earn more money.

Netting It Out

No matter what age you begin teaching your child about money and financial responsibility, you are engaging in a topic that has value in its own right. Classroom stock competitions are one of the most exciting events for kids. They encourage our youth to be competitive, learn fiscal strategies, and understand risk and reward. And if, at the end of the day, your child has their hand at the piggy bank for now—know that you have set a foundation for success and financial security they will carry with them for life.
But hopefully, as children begin this real-world introduction to these more complicated investment types, they are also learning the value of earning money. All this talk about savings and accumulating interest is important, but meaningless until they understand what their money is truly worth. Lets go back to that $100 birthday check. Obviously, $100 that is given to them is worth a lot more once they realize how many weekends of cutting grass are needed to earn the equivalent. By earning some money themselves, they may not want to waste it on silly objects right away. Instead, they may think twice and fatten their piggy bank.

Save For America
This school-based savings program has met with success nationwide. Once a week, students go to school and make a deposit with the help of an adult volunteer. The volunteer takes the student deposits to a local bank and makes one lump sum deposit into a holding account. The next business day, through the Federal Reserve Banking System, Save for America debits the holding account and credits all the students’ accounts with their deposits. Student deposits will appear on their regular bank statements. For more information on how to bring this program to your school, go to saveforamerica.org.

Shelley Bokman is a freelance writer, born and raised near Rochester, who now lives in Northern California