With the current shift away from consumerism, parents face a great opportunity to teach the next generation valuable savings skills that may have gotten lost along the way in the past few decades. When good money management habits are taught at a young age, people are more likely to manage their money well as adults. Here are a few savings tips to help parents teach their children financial responsibility.

Lesson #1: Save Up for Rainy Days and Sundaes

By teaching your child early that savings make it possible to get things that they want, without owing someone for it later, they can begin learning to resist the need for instant gratification that plagues many adults today.

Obviously, any lessons on savings must be age appropriate. A seven-year-old will not understand the same basic concepts as a 17-year-old. However, you can still include your child in the discussion over which savings account is right for them.

Explain to your child that a savings account is a place to save money safely for future use. If they have a special item they want to purchase or trip they want to go on, money placed in a savings account will be available for use when the time comes. It is a place to store cash where you have immediate access to your funds and the opportunity for a small amount of growth. (And maybe affords a trip to the ice cream shop!)

Lesson #2: Interest Rates Rule

Nailing this lesson will make a huge difference in how your kids will manage money. In as basic a manner as possible, show your kids how interest rates affect different accounts.

For example, a high interest rate applied to a savings account is a good thing, increasing the amount of return for their investment. Conversely, a high interest rate on credit card debt can spell death to your personal finances in that you will have a difficult time paying off your balance if hundreds or thousands of dollars are added as a result of a high interest rate.

Once your child understands the concept of a savings account and interest rates, you can work together to find the account that matches their savings needs. This may include reviewing online accounts versus accounts in local banks. A basic discussion on interest rates and how they can make your money grow can be included when comparing banks.

Lesson #3: Debt is Dangerous

A very big motivator for children to save money is to get something in return. This is true for everyone. Either you are trying to get more money from your savings or you are saving to get something.

While this is a great way to look at savings, you could also teach your children that by having a cushion of cash, at some point they will be able to avoid going into debt. This will be a hard concept for younger children, but important to teach as your child gets older.

For example, a well-padded savings account can be a lifesaver when you get older and need big-ticket items or living expenses in a crunch. Without savings, most people are forced to either go without or if necessary take out a loan or use some other form of credit to meet their financial obligations. By having a savings account in place for just such emergencies, a person can avoid debt and the burden of paying back an unexpected balance during a time of financial hardship.

Teach them well now, and they might not come crying to you later with a big credit card bill and no way to pay it.

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