Around the world, financial experts are in agreement that, because of both inflation and financial concerns such as an increasingly competitive job market, saving is more important to kids than ever before. With this in mind, all eyes are on how much children are tending to spend. The results are somewhat grim at best.
What Kids Are Getting and Putting Away
Evidence shows that, despite the economic troubles that have hit many families, parents aren’t completely stingy when it comes to handing money to their kids. The average amount parents give in the United States, according to a 2012 survey by the American Institute of CPAs, is $65 a month, or about $16.25 a week. That translates to a yearly sum of $780 annual. For that sum, a kid could buy their own decent-quality laptop or even a flatscreen television, or in terms they might like even better, pay a $50 monthly phone bill on their own for over a year.
The AICPA survey clearly shows that kids have a bit of money available. They are not doing a very good job of saving what they get, however. Only about 1% of parents surveyed say their kids put any of what they receive into savings. This tendency to spend is one reason why marketers so aggressively focus on reaching kids—companies know that 99% of kids are going to use their money to buy, and that even the 1% that saves still will spend some of what they get.
What Experts Say What Kids Should Save
What you give your children is completely up to you. Nothing says you have to give your children as much as the AICPA average, and you might want and be able to give more. This fluctuation in the amount of money provided means it’s generally best to look at savings in terms of percentages.
The general rule long touted by financial experts is that kids should use a three tier system to work with their money. These experts usually recommend giving at least 10% to charity and putting another 10 to 20% into savings. That leaves 70 to 80% for spending. This is only a starting point, however.
The Role of Your Child’s Goals
Each child is very individual in terms of what he wants to do and achieve. This can make a big difference in terms of what your child should be saving. For example, if your child wants to go to summer camp, he’ll likely need to save less than if he has his eye on a good used car. The more expensive things your child wants to buy or do, the bigger percentage of his money you need to have him putting away. Time is also something to consider here. If your child only has six months to save for his goal, for example, he’ll need to be putting away a larger percentage than if he had a year.
The Parent Conundrum
The AICPA survey shows that kids need improvement in the savings department. Fixing this is challenging, not only because some parents are limited in terms of time and informational or educational resources, but also because parents are spending, too. Despite the economic instability caused by the Great Recession, parents still have personal debts that total thousands of dollars per household, much of which is on credit cards. Additionally, in the United States, a 2013 report by the Employee Benefits Research Institute (EBRI) indicates that only 66% of workers are saving for retirement. Some of the solution for getting kids to put money away, therefore, might be for parents to learn how to do it themselves so they can model it to their children.
