Teaching delayed gratification and saving

February 25, 2014 by

I just read an article by Tamar Satov  for CPA magazine Financial Decisions Matter. She is considering giving her eight year old son an allowance raise, but wondering if that will lead to him spend more rather than save. She shares that her son has learned a lot through allowance, but he still need to learn more about savings. She wants to teach him to view the raise in the allowance as an extra money towards his savings goals.

teachingdelayedgratificationI’ve been trying to teach my own kids value of money through allowance. I have witnessed that they lack delayed gratification, and who can blame them?  Even adults struggle with it. I found that it was easier to teach them to save when they didn’t fully understand that money has power to buy toys, and that the more money they put to savings, the less they have to spend. They used to save as much as 20 – 30% from each allowance, and even more from birthday gifts. I made them save a lot as I didn’t want all of the money to be spent on toys. I certainly didn’t feel like stepping on any more small toys scattered throughout the house (We’re trying to contain the mess to one room only, however the toys have migrated (as my husband says) to the rest of the house).

Back to the subject – as my kids are getting older we are saving less from each allowance, perhaps 10 – 20 %. I find it very hard to explain the concept of delayed gratification to the kids, and that is why we have short term and long term savings. Short term savings are for something that they are saving for in a near future like a LEGO set that they cannot purchase out right from their allowance. We also use the chart from Dinarii's Tools and Resources webpage to help visually track their savings. This helps with the discipline of putting the money away, as well as experiencing the rewards when they purchase the toy. We also have long term savings, which are for things in the future like the first car, trip to Europe, etc… This money is not to be enjoyed until much later in the future.

I think it is only human to feel the need for immediate gratification and spend. I believe that we can fight this feeling by making the savings part of the second nature by ingraining it our kids every time they receive allowance or gifted money. My husband told me that he read about a woman who was taught by her parents to always put some money into savings before spending the rest. Now that she is an adult it is very difficult for her to blow all her money at once before saving some first. I want to condition my kids to be the same way by teaching them to pay themselves first, before they start spending and paying others.

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