Teaching your children a few basic money lessons can help them develop practices that last well into adulthood. In fact, a recent study (from Brigham Young University) found that children who are given opportunities to manage money when they're young are more likely to be financially responsible entering adulthood. While schools are now starting to bring financial literacy into their curriculums, the basic and most important lessons are often learnt at home.
We’ve covered teaching your kids about money in a previous article, so now we’re focusing on saving money and building saving habits that will stay with them well into adulthood. After all, saving money is an important part of building wealth and having a secure financial foundation. It’s never a bad thing to have some money in the bank for an emergency or a rainy day!
Start with a piggy bank or savings jar
Whether it’s pig-shaped or not, a piggy bank is a great place to start when beginning the savings journey with your kids. Explaining what it is, why you’re giving it to them and why it’s a useful thing to use will help you get started with a savings conversation.
For some children, a traditional piggy bank may not work. You may find a clear jar works better so that they can see the amount of money inside growing. This could cause a certain level of temptation in some kids, which could lead you to another conversation about wants and needs.
If your child’s pocket money isn’t paid using cash, it may be worth researching digital options. There are several piggy bank apps available on both Android and iOS that you and your child can use.
Introduce goals
For kids (and some adults), it’s hard to feel motivated about saving if there isn’t a clear target to work towards. Asking your child what they would like to buy and then helping them work out what’s needed to get to that goal is the easiest place to start.
The strategy will likely require you to check in with them every-so-often and see how it’s going – especially if they’re saving for something big. Regular check-ins will also help them not lose sight of their goal and will give you both the opportunity to review the goal and make any changes to it.
When setting a goal with your child, it may be a good idea to add a timeline or deadline to it. That way, if the set deadline rolls around and the savings goal hasn’t been reached, you can help your child determine why and work out what they could have done differently.
Establish a rewards scheme
One of the most fundamental financial lessons is that money is earned. Although there are exceptions to this, it’s an important thing for children to understand early on. Learning that they can’t get the things they want for free – and neither can grown-ups – encourages them to be more mindful with the money they do have.
Paying pocket money when they help around the house or complete specific chores can really help drive this message home. If the rewards are small, it’s an opportunity for you and your child to talk about the instant gratification of buying something small (like some sweets) versus saving the money and getting to purchase something bigger (and maybe better) down the line.
Incentivise putting money away
It can be hard for children to see the benefit of saving for tomorrow. To make saving more appealing and teach them about how saving with a bank works, you could offer your child bonus money when they save a certain amount or save for a certain length of time. Just like earning interest on your term deposit or savings account, this is a tangible way of demonstrating a benefit of saving.
For example, if they save $10, you could add $1 to their savings pot. This shows that more could be gained from storing money than from spending. It’s also an early introduction to compounding interest, and a good way to start a conversation about banks and banking.
Be a good example
We all know that kids copy and learn from the adults they’re surrounded by. The best way to teach your child about saving money is to save money yourself.
Show them your savings account statement each month so they can see how your balance is growing or have your own savings jar that they see you put funds into regularly. Whichever way works for you, it’s important to keep conversations around money happening with your children.
Open a kids bank account
Once your child has mastered a piggy bank, it’s time to think about opening them a dedicated bank account for their savings. Setting up a savings account that pays interest regularly is another way to help your little one see that money can grow over time with regular investment.
Our Way Cool Saver account is for kids up to 15 years of age. It’s specially designed to help them start on a regular savings plan. With no account fees and no minimum monthly deposit required to earn interest, it’s an easy-to-understand account that will get your kids off to a great start.
Teaching kids how to save money may seem like a tough task at times, but remember that for children, learning to save isn't easy. Stick with it though because when it’s done early it can build a habit that can last a lifetime.
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