Saving money for kids can be a difficult concept to get. In fact, natural mode for many kids (and adults) is to live allowance-to-allowance. Let’s look at how to break your child’s paycheck-to-paycheck mentality before they even get started adulting.
One thing I’ve heard over and over from working with adults + their money is how they hate living paycheck to paycheck.
In case you’re one of the lucky ones who’s broken free from this, let me give you a quick refresher of the life you (gladly) left behind: living paycheck to paycheck means when your paycheck ends, you’re unable to meet your financial obligations. In other words, there’s no savings and/or passive income coming in to keep your money momentum going…and yet the bills don’t stop coming, do they?
Psst: not sure if you’re living this life? Just ask yourself what happens if your next paycheck doesn’t come. Squeezed past that one? The next one after that doesn’t come either. How would that play out? If it’s looking scary as heck with a fire thrown in, then you’re living paycheck to paycheck.
This puts an even greater risk to you and your household in the event of unemployment. Sure, you might get unemployment insurance, but it’s a fraction of what your usual paycheck would be (which was mainly spoken for already).
Being one big car repair away from landing back on your mother’s (um, that’s you) couch is not what we want for your child, either. So, we’ve got to plant the seed that will stop this from ever starting.
Does Your Child Have an Allowance-to-Allowance Mentality?
Does your child currently live an allowance-to-allowance mentality? In other words, they spend all their money as soon as they get it, chomping at the bit for that next bit of allowance to flow into their lives and keep all their amazing wants afloat?
That’s a seed to paycheck-to-paycheck living.
Maybe it won’t lead directly to a paycheck-to-paycheck life. But it certainly seems like it could, right? Not to mention 50% of Americans live this reality, so it doesn’t seem like such a far stretch.
We want to keep your child securely in the other half of that 50%.
Let’s change that now, when losing their next paycheck doesn’t mean piling on tons of debt.
It’s time to break that allowance-to-allowance mentality by teaching your child to save their money first from week to week, and then from month to month.
Pssst: looking for a really unique, engaging way to teach your child to save money? Be sure to check out my Mt. Everest Money Simulation by clicking the image below.
Wait a Sec…My Child Has Already Developed an Allowance-to-Allowance Mentality
Rest assured, Mama Bear. You’ve got time to turn this money ship around.
Saving money for kids doesn’t have to be hard. Instead, it can be incremental.
I’ve got some tweaks you can make to your current allowance system that I’m numbering from least aggressive to most aggressive. Sometimes your child will get the hint (the least aggressive option) and other times it’s going to take a bit gentler nudging.
Note to yourself: doesn’t matter which one they take to. No judging here! We’re looking for results, and each child is different. If your child needs one over the other it doesn’t mean anything.
Also, one may be more appropriate for where your child’s money development is than another. Or you might fear being too controlling or helicopter-y, in which case you’ll want to pick one of the more hands-off approaches while still (hopefully) getting the result you want.
Allowance Tweak #1: Pair their Allowance with an Incentive Program
Saving money for kids could be as simple as giving them an incentive. Heck, it works for adults!
Introduce an incentive, just like banks have, when your child saves part of their money. But only for the dollars that make it past the allowance period. For each dollar left at your next allowance rollout, give them $0.25. Or $0.50. Or $1.00.
How will this change your child’s savings mentality?
Depending on how chiseled your child’s instant gratification muscle is, you could start with a one-week incentive, a bi-weekly incentive, or a full-month incentive. Pick the one that is a stretch, but not outside of the realm of their ability.
Allowance Tweak #2: Stretch their Allowance by One-Notch
The longer the time in between when they get allowances, the more they’ll have to adapt to planning, budgeting, and actually saving their money.
So stretch their allowance period one notch up from wherever it’s at right now.
- On-Demand: If you’re doling out money on-demand, then instill a weekly allowance ritual to introduce the concept of waiting + budgeting their money.
- Weekly: Take their allowance to bi-weekly.
- Bi-weekly: Take their allowance to monthly.
Allowance Tweak #3: Tweak the Amount You’re Giving Them
Hand over a few purchasing responsibilities to your child, but don’t actually give them enough in each of their allowance payments to cover both what they want AND what you have told them they are responsible to pay for.
I mean, how many of us adults get paid enough in each of our paychecks to cover everything we want AND need at the moment? Not many (certainly not me!).
This means if they don’t learn to carry over (i.e. that dirty word, “save”) money from one allowance payday to the next, then they never get what they want. Or they make an even worse decision, and not buy what they need, making the lesson hit home even harder.
Eventually, they’ll get the hint.
Note: I think this one will need to include some conversations from you to remind them that you are fully giving them enough money to buy the things they want + are responsible for, but they need to manage their money differently in order to see it happen. Talk about a teachable money moment!
What this could look like to increase saving money for kids:
- You let your child know they are now responsible for a few extras they’ve been sneaking onto the grocery list (aka a ‘want’, such as that really expensive designer shampoo you’ve never even purchased for yourself), plus something that has previously been paid for and chosen by you (aka a ‘need’, such as their backpack for next school year).
- Figure out how much extra they should receive in order to be able to cover these extra responsibilities you’ve given them. In other words, figure out how much you, as a responsible and budgeting adult, would be comfortable paying for each item. Then if the child wants to splurge to the next level, they’ll have to figure out whether or not spending their own money on the extra is worth it + how to actually save up to make it happen.
- Increase their allowance amount to account for the extra costs they’re now responsible for, but not so much that they can pay for the items in one fell swoop. How far should you stretch it out? Well, that’s up to how far along you think their instant gratification muscle has developed.
Pick one of these allowance tweaks, and go with it. Test it out for a month or two, and then tweak it or move on per your child’s taking to the actual lesson you’re trying to impart: curtailing the allowance-to-allowance mentality by having them discover the need to save their money.