Teaching a Three Year Old How to Save

Over the last few months, my three year old son has received quite a few $1 and $5 bills from relatives for various reasons – his birthday and Christmas chief among them.

Prior to the past few months, we would simply allow him to “spend” the money in a very simple fashion. He would take a dollar to the store with him, select a low-cost toy (usually a Hot Wheels car), then give that dollar to the cashier to pay for it (with Mom or Dad quietly making up the difference). It’s a simple enough lesson – money is something to be exchanged for goods and services.

Lately, though, he has become interested in purchasing other toys – some of which cost several dollars. Our answer up to this point has usually been that his dollar can only buy certain toys, but recently I decided that it was time to extend his learning a bit.

A few weeks ago, at the store, he had two dollars to spend. He spent most of his time intrigued by a nifty pullback car that cost $7.99 – and he wanted to spend just a dollar to buy it.

I told him quite simply, “This car costs eight dollars. You only have two dollars. You don’t have enough dollars to buy that car.” We worked through the counting using our fingers so that he understood that he needed six more dollars.

That didn’t shake his interest in the toy, however. He still wanted it.

“Well, if we don’t spend these dollars today and take them home with us, we can wait until we get six more dollars and then buy the car,” I suggested.

After some commiseration, he decided to spend one dollar on a small car and to try this saving concept with the other dollar. We got home, found a jar with a lid, and put the dollar inside so that he could see it.

That jar now sits on our kitchen counter. Since then, our son has been able to add some money to the jar – he can clearly see his savings as it builds up. He knows what it’s for and he’s excited to contribute to it whenever he can.

To put it simply, saving money has now become relevant and exciting for him. It’s very tangible – he can see his savings grow. He also has a goal that’s small enough that it seems reachable – he only needs to save up to $8, after all.

I think that the same aspects that are making saving tangible for my three year old son work well for adults, too:

Set a clear, tangible goal for savings. Know exactly what you’re saving for and keep it in mind. Figure out the exact dollar amount you need to reach. Know what the reward is for reaching that dollar amount. The more tangible your goal is, the easier it is to reach for it.

Set up milestones along the way so you can see progress. A $10,000 goal seems unbelievably high for many people. So transform it a bit. Turn it into a goal of $100 a month. With that little goal each month, you can reach your big goal in a bit less than eight years. Then push yourself just to reach that little goal each month – or to exceed it!

Keep the savings in your mind. Put up reminders of your goals in places where they’ll have impact for you. Wrap a picture of your kids or your dream house around your credit cards. Write the dollar amount on a Post-It note and keep it on the bottom of your rear view mirror. Keep that goal in your mind and you’ll stay focused on it.

So what’s next? The near future points us to our child’s next lesson: how do you earn money? That will be a whole new adventure.

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