The Problem:

My son has been asking to buy a new video game, and because we ask him to save a little money each time he gets gifts or allowance, he has enough money in his account to make the purchase. The problem is, if he buys this, it will clear out his savings and he will likely find another new thing he wants in a month. How can we help him understand at 10 years old the value of keeping some money in savings?

The Expert:

Rich Martinez, president and CEO of Young Americans Bank and Center for Financial Education

The Solution:

As a parent of a “spender,” I appreciate the difficulty of this situation. To make saving important, first help your child set short- and long-term savings goals. Your 10-year-old will probably set a short-term goal of buying a video game. So, try to help him realize that there are larger, more expensive items that he might want (or need) in the future. These items require saving.

If your child can’t think of anything, point out examples like spending money for a trip, a bike, or even gifts for family and friends. Vacation spending money is a great place to start because you usually know the vacation date in advance. Together, research the cost of souvenirs he might like to buy. Then, calculate how much he will need to save each month to reach his goal.

I also recommend that your child open a checking account if he has a steady source of income, like a weekly allowance or a neighborhood dog-walking job. The money in his checking account becomes his spending money, and the money in savings becomes the money for long-term goals. Experts differ on how much should go into savings, but a good place to start is to encourage your child to save 50 percent, spend 30 percent, and share 20 percent.

Once he has set aside money to save and share, give your son the freedom to spend the rest of his money as he likes. Try to reserve judgment on these purchases; buyer’s remorse can be a much better teacher than a lecture from mom or dad.

Finally, it’s never too early to have honest conversations with your children about money. If your child will need to help finance his own education someday, tell him that. When you make a family budget, include your child. Helping your 10-year-old make wise financial decisions is a lot easier than helping your 20-year-old.