How to Teach a Child to Save for a Goal, by Age

Make saving about one thing your child really wants. "Save more" is hard for a child to picture. A specific goal, for example a $40 skateboard by the start of summer, gives your child a number to aim for and a date to count down to.

How parents teach saving matters too. A 2014 study of Dutch household data, published in the Journal of Economic Psychology, found that parents teaching children to save was linked with a 16% higher likelihood of saving as an adult and about 30% more saved. The most effective approach combined giving pocket money with keeping an eye on how it was used and advising on saving and budgeting ². The data come from the Netherlands, not the US, and the results show links, not proof of cause and effect.

The CFPB publishes Money as You Grow, a guide for parents. For school-age children it suggests practicing saving by setting a goal for something your child wants, breaking it down into small steps, and helping your child take those steps ¹. Five steps cover it:

• Pick one goal together. Write down what it is, what it costs and when your child wants it.
• Work out a weekly amount. Take what is still needed, divide it by the number of weeks until the date, and round up. The savings goal calculator does this for you.
• Make progress visible: a jar your child can see into, a picture of the goal, or a chart to color in. The CFPB suggests having your child draw, make a chart or tell a story about their saving ¹.
• Check in once a week. Add the week's amount, update the chart, and ask whether the goal still feels worth it.
• When the goal is reached, celebrate, and let your child buy the thing they saved for. Then pick the next goal.

Money skills build in stages. The CFPB's youth research describes early childhood as ages 3 to 5, middle childhood as ages 6 to 12, and adolescence and young adulthood as ages 13 to 21 ³. The table splits ages 6 to 18 into three groups. Cells without a source are our suggestions.

There is no universal rule. For school-age children, the CFPB suggests encouraging your child to save 10 percent of the money they get, and calls saving at least a dime for every dollar you receive a good habit ¹. For teens who earn money, its suggested rule is to save 10 percent of what they earn ⁵.

When there is a specific goal, your child may choose to put aside more than that for a while. Agree on the amount before the money arrives, so saving is a plan and not an argument.

Still deciding how much allowance to give? The allowance calculator shows what US parents report paying, by age.

Matching means you add money on top of what your child saves. It is optional, and the money comes from you. The CFPB gives a simple example of a matching plan: you put in 25 cents for every dollar your child saves ¹.

A 2016 CFPB blog post suggested matching five, ten or 25 cents for every dollar a child saves, and setting a limit on the total amount you match per week or month ⁶. If you match, a few rules help:

• Set the rule before the first deposit: how much you match and the weekly or monthly limit.
• Match only money that stays saved toward the goal, so the match rewards waiting.
• Put the match in the same jar or account, so your child sees one total.
• Worked example: a $60 goal with $10 already saved and $5 a week takes 10 weeks. With a 25-cent match, each week adds $6.25, so it takes 8 weeks. Try your own numbers with the parent match in the savings goal calculator.

Two good homes for the money: a jar or piggy bank at home, or a savings account in your child's name at a bank or credit union.

A jar suits younger children, because they can see and count the money. For young children, the CFPB suggests finding a jar or can and labeling it for saving ⁴. The U.S. Mint's Spend, Save, or Share activity uses three labeled jars or other containers and asks children to decide their goals for the money first ⁷.

Keeping the goal money apart from other money may help. In a 2011 field study with 146 adult laborer households in rural India, money set aside for saving was saved more when it was split into two envelopes, and pictures of the households' children on the envelopes added to that effect ⁸. The study involved adults, not children, so treat it as an idea to try, not proof.

A savings account suits older kids and bigger goals. The CFPB suggests visiting a federally insured bank or credit union with your child and talking about how money in savings accounts is safe and protected ¹. Check for deposit insurance before you open an account: FDIC deposit insurance covers $250,000 per depositor, per FDIC-insured bank, for each account ownership category ⁹, and the NCUA's Share Insurance Fund insures individual accounts at federally insured credit unions up to $250,000 ¹⁰.

If you keep a record of your child's savings in a notebook or an app, keep the real money set aside to cover it, so the record is never a promise you cannot keep.

It will happen: something new shows up, and the goal suddenly feels far away. In our view, a wait rule helps most. Before any money comes out of the goal savings, your child waits a set time, such as one night for younger kids or a few days for teens, and then decides.

After the wait, ask two questions: do you still want it as much, and how much longer will the goal take if you spend this? The savings goal calculator answers the second one.

Within your family's rules, it is your child's choice. If they spend it, talk a week later about how it felt, without blame. For more on pausing before buying, read our guide on how to stop a child from impulse buying.

An app can make a goal and its progress easy to see, for your child and for you. Check these points on any app you consider:

• Who holds the money. Some apps are linked to a bank account or a card and move real money. Others only keep a record, and the parent keeps the real money.
• Card or no card. Decide whether your child should practice paying with a card now, or practice saving first.
• Parent approval for children under 13. Check how the app asks a parent before a young child can use it.
• Ads and tracking. Read the App Privacy section on the App Store or the Data safety section on Google Play to see what the app collects.
• What the parent sees. Check whether you can see each goal and its progress, and whether you get updates.

This guide is published by Babalata. Babalata is a savings app for kids ages 6 to 18 in the United States: kids set savings goals with a photo, a target amount and a target date, record each amount they put aside and watch the goal fill up, while parents keep the real money, because Babalata has no debit card or bank account and does not hold or move money. Babalata shows how much to put aside each day, week or month to reach the goal by the target date. Each time a kid puts money aside, they record the amount in the app, in whole dollars. The app keeps the record; it does not move money. Parents can see each of their child's goals: the amount saved, the target, the percentage and the target date. Babalata does not hold, move, or transfer money and is not a bank.