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How do I teach my kids to save money?

Alex here. After school yesterday, the boys and I headed down to the beach. At a balmy 23 degrees (that’s about 75°F), it was too lovely to sit inside.

I gave the littles $1.00 to buy a freezie pop at the tea room (yes, our beach has a tea room instead of a snack shack. This is Oak Bay, after all.). They returned shortly, each holding his respective half of the freezie. Thing Two dutifully delivered the receipt so I could record it in YNAB; Thing One handed over the change.

We sat on the sand, and while Thing Two unearthed pirate ships with another random dirt-streaked beach urchin, Thing One and I talked about money. His trumpet teacher has suggested he might like to try busking at the Inner Harbour this summer. “My son used to do it,” she said. “He made a fortune.”

Huh. A fortune, eh? For a kid whose mum doesn’t have a lot of extra cash to fund investments, this could be a powerful way to build his long-term savings.

Thing One loved the idea as soon as his teacher suggested it. And when I told him he could possibly earn in excess of $100/hour, he was seeing dollar signs, too. I told him he had to be serious about it if I was going to commit the $190 for his busking license. He said he was serious.

As a busker, he can work whenever he wants, for an hour or two at a time. He’s up for it. Heck, eighty years ago, kids his age were working ten-hour days delivering packages around the city on their bicycles.

The conversation quickly turned to what he plans to do with his earnings. I waded in early, waving the savings flag. “You have to save some of that money,” I said.

“How much?”

I thought fast. “At least fifty percent.”

“I don’t want to save half of what I earn!” he whined. “How about ten percent?”

“No. Fifty. You should always save at least as much as you earn.”

I just pulled that one out of thin air. I have no idea how much I should reasonably expect him to save. Is fifty percent fair? Part of me wishes I’d pegged the savings rate even higher: say he earns a couple grand this summer. What the heck is he going to do with a thousand bucks?? That’s a lot of Lego (and it ain’t living at my house!). And secondly, he’ll only have this insane earning opportunity for a few years, before he gets too big to be cute for the tourists. Shouldn’t I drill down on savings now?

Besides deciding on the savings rate, I struggled – as I often do – with justifying to him why it’s so important to save his money. I remember my grade ten math teacher showing us the power of compound interest…and I remember not giving two farts in a winter windstorm. I just wanted Lawrence H. to ask me out.

It’s hard to convince a nine-year old that he’s going to need a lot of money to buy the things he wants in life, especially when I’m not even sure what, among our western values, I support anymore. Do I really want him to buy a car? Do I really think he should aspire to owning a money pit house? Sometimes I even wonder about the cost-value breakdown of a university education.

And so here we are, with a summer job, an agreed-upon 50% savings rate…and a mother who can’t figure out how to convince her son how important it is not to spend everything you earn.

How do you explain the importance of saving to your kids?

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How do I teach my kids to save money?