Teaching Kids About Money

You might tell your children to finish their homework before they can go out and play. You insist they eat their main course before they get dessert. And maybe you make them save their pocket money for a few weeks before they can buy that new toy. It's all about delaying gratification--and it is one of the most important financial skills any of us can learn.

Tuesday, April 24, is Teach Children to Save Day, a program developed by the American Bankers Association Education Foundation and which Citi helps sponsor. Citi employees around the country will spend the day teaching children the concept of saving and talking about the difference between needs and wants.

This sort of education is sorely needed. Despite the uptick in the savings rate prompted by the Great Recession of 2008 and early 2009, Americans today are still far more inclined to spend than earlier generations.

According to figures from the Commerce Department's Bureau of Economic Analysis, annual savings as a percentage of disposable personal income only once fell below 7% between 1950 and 1986 (and then only just - it was 6.9% in 1955). But our ability to delay gratification has deteriorated notably since then. The savings rate subsided in the late 1980s and fell off rapidly after 1992, hitting a low of 1.5% in 2005.

Unnerved by the Great Recession, Americans have started saving more. Still, 2011's savings rate was just 4.7%, well below what we saw for much of the post-World War II period.

Arguably, in the short-term, it might be helpful for Americans to spend more, rather than save, as we look to spur the economic recovery. But if we're going to avoid another debacle like the Great Recession, it's important for folks to embrace financial prudence. Looking to raise money-savvy kids? Check out the pointers in this article.

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