Dadline: Teach kids to savor the benefits of saving money

Kids can learn the value of a dollar. Give them an allowance, then tell them that they are responsible for decisions about how to save or how to spend their money.

Many financial planners agree that it’s fine to give children some kind of weekly or monthly stipend, but with strings attached. If they want a new helmet or skateboard, they have to save for it. If they get invited to a birthday party, they must choose and purchase a gift with their own money.

Kids can make financial resolutions for the new year and set budgets, just as their parents do. Here are a few tips for helping children learn how to manage money.

Open a bank account. This is a rite of passage for just about every American child. Children can accompany parents to the bank, make their own deposits and watch their money grow.

Divide their savings. One method that has worked well for my daughter has been splitting her allowance into different goals. She started with three envelopes she keeps in her room — one for saving, one for personal spending and one for gifts and donations. Her allowance is divided equally among the envelopes, with the one marked “savings” eventually going into her bank account. Kids can also save this way with old-fashioned piggy banks or jars where they can drop their coins.

Manage those fundraisers. When a child sells cookies or candles during a ubiquitous fund drive for a school, ball team or Scout troop, let her keep up with the money and the orders. If she comes up $5 short because she didn’t take care of the money she collected, tell her she needs to take a fiver from her savings account. That will make her pay closer attention to the totals the next time.

Set spending and saving goals. If a child wants to buy a new bicycle, cellphone, pair of Chuck Taylors or anything else, let him research the costs and make a plan to save for the purchase.

Researching money-saving tips for kids is easy online. The site TheMint.org is a good resource for grown-ups and kids. The site has advice for young children, teens, parents and teachers. In fact, the site lists its own variation of multiple savings accounts, which it calls “four little banks”: spending, saving, investing and giving. Go online to www.themint.org/kids/saving-tricks.html.

Learning about saving for the future isn’t just for children. Multiple studies have revealed that most American adults have not saved enough for retirement or for their children’s education. Here are just a few basic pieces of advice.

Invest in your 401(k). If your company offers a 401(k), you should try to put in the maximum allowable amount. If you can’t save that much, you must save enough to earn the highest matching amount from your company. Again, that’s a must. Anything short of that means you are leaving free money on the table.

Roll into Roths. Ask your bank or financial planner about Roth IRAs. These accounts earn money that you can withdraw tax-free when you retire.

Check into 529s. A 529 savings plan is a way to put money away for children’s future college expenses. Virginia’s 529 plan allows money to grow tax-free and be used for higher education expenses at any institution in the United States. The new tax law that went into effect this year now allows 529 money to be used for K-through-12 expenses at private and religious schools, although details are still not completely clear. Go online to virginia529.com or call 888-567-0540 for more information.

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