Schwab MoneyWise ®

Starting the Savings Habit

The power of an early start.

Our Two Cents

Compound interest is a particularly interesting topic for kids, since the concept of "free money" is motivating. Explain that if they put their money away in a bank for a bit, it will come back bigger and better.

Kids have time on their side—a huge asset when it comes to saving. The sooner a child starts to save, the longer they have to accrue interest, build up funds, and learn valuable financial lessons.

The key is motivating them to get started. When talking to kids—especially teens—about the importance of saving, explain how saving is like paying themselves first and can help them:

  • Gain the financial freedom to do what they want in life.
  • Meet their short- and long-term goals.
  • Become financially independent, secure, and potentially even wealthy.
  • Be prepared for unexpected expenses, which can reduce stress.
  • Pay off debt.

Setting a realistic savings amount

In general, putting away 10% of their income is a good savings goal. Even young kids can save 10% of their allowance or money they receive as gifts. This will help prepare them for the working world, when they will need to put 10% of their salary in their 401(k) each month.

How to make savings grow

When your child starts to accumulate money, it's time to put it in a bank account.

An interest-earning savings account is a good first step. Shop for the best offer, paying attention to service fees and minimum-balance requirements. And make sure to explain how compound interest works.

Finally, when your teen has a job, have them use direct deposit for their checking account and set up an automatic transfer to their savings, so they can automatically put away money with each paycheck.

Keep learning

Now that you and your kids are starting to think about saving, take a look at the different types of accounts that are available. Also, see just how much better it is to start saving early.


The information on this website is for educational purposes only. It is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner, or investment manager.

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