Do you have a savings target? Is it easy for you to keep your savings? Here is why you may want to talk about savings targets with your kids and how it may help you as they develop the saving habit.
I had an interesting conversation with my son the other day. I was under the impression that saving was not a big deal for him. When we started his allowance a few months back, he was saving for a big-ticket item, and he had no problem doing so. He would diligently put money into his savings jar weekly. He also put all the money he got from his birthday and other sources into his savings as well. Seeing how keen he was to delay spending to reach his savings goal, I felt like he had the concept of saving in the bag. On my list of personal finance lessons, I was ready to put a big checkmark next to savings and move on to the other stuff.
Then my son threw me a curveball. Our neighbourhood holds an annual yard sale, were multiple streets will coordinate to put out their wares on the same day. It is a great time to find some bargains, and my son knows it. He brought his cash with him, and I thought nothing of it. It was only after the yard sale that I realized he had pilfered his savings jar to go treasure hunting in our neighbours’ stuff and had spent both his ‘spend’ and his ‘savings’ that day. I was a little surprised that he would dip into his savings, considering how steadfast he had been in saving in the past. When I questioned him, he made it clear that he didn’t want to miss out. He wanted to make sure he had all his money with him. That is some solid logic that I couldn’t argue.
When I asked him about depleting his savings, he seemed nonplussed. And that is when I realized my error. When we started the allowance, I asked him what he was going to save for. He created a savings target, a goal. When he reached that goal, the savings jar became a defacto spend jar. With no goal, there was no reason not to dip into his savings. The saving habit was natural for him when h goal was in sight, but once reached, it no longer had a purpose. Why not spend what is in your savings if you are not saving for anything?
Set a New Target
Luckily for us, there is no end of items that my son wants. We came up with a new savings goal. And he is back to his old habits of keeping his save and his spend separated.
Spending savings is not money management, but it is an easy habit to get into. And I feel like goal setting is a great way to keep the two buckets separate. Getting into the habit of setting a target to save will hopefully translate one day to getting him into the habit of having an emergency fund, a retirement fund, and all other savings goals that go along with adulthood.
Wash and Repeat
It was an excellent reminder to me of why I am doing what I’m doing. These lessons that I’m writing about, and trying to pass on to my kids, don’t come quickly, they require re-enforcement. So, while in my head, my son had grasped the concept, learning these concepts and forming the right habits take time, and repeated effort. Luckily we are working on it. And I know he will get it.
If you have a child who needs an extra incentive, take a picture of your child’s savings goal and tape it to their save jar. Now they will have a visual reminder of what they are saving for. This will help them keep their target in mind.