Every year, one day in April is designated as “Teach Children to Save Day.” This day, is all about helping kids become smart about money from an early age. It encourages parents to teach their children about money.
As a parent, you want the best for your children. This doesn’t necessarily mean you want them to have the best clothes, the latest toys, or the coolest gadgets. Most likely, it means you want them to be safe and secure, and you want to lay a foundation that they can build upon to do well in life.
In school, we aren’t really taught about the importance of saving and many of us find that as adults, we have to fend for ourselves. We learn algebra, calculus, and trigonometry but not how to budget, save, or invest. Learning how to count change in the classroom is very different from getting a real allowance, opening a savings account, and creating a budget to help your kids buy the things they want. Although many schools attempt to teach basic financial literacy to students, the responsibility falls to the parents to apply those lessons to real life.
But there are ways to empower the next generation, and that starts by teaching children the importance of saving from a young age. By bringing this vital habit to children while they are young, it is more likely that they will be able to handle their money better in the future.
If you are a parent, here are 7 ways to teach your children about saving money.
- START WITH THE BASICS AT A YOUNG AGE
The earlier you start a child’s financial education process, the better. Research in the UK from Cambridge University suggests that money habits and attitudes are already formed by the age of 7. Once your kids are old enough to know they shouldn’t be sticking coins in their mouths, you should introduce them to money. Explain what it is, how it is used, and show them how money works
- LET THEM EARN THEIR OWN MONEY
Some parents pay their children a weekly or monthly allowance, often linked to household chores. Allowing children to earn and save money provides them with the opportunity to learn how to use it. When an allowance is offered in exchange for chores, children also learn the value of their hard work.
- SET SAVINGS GOALS
To a kid, being told to save without explaining why may seem pointless. Helping children define a savings goal can be a better way to get them motivated. If they know what it is that they want to save for, it will help them break down their goals into manageable bites. If they want to buy a R200 toy, for example, and they get a R50 allowance each week, help them figure out how long it will take to reach that goal, based on their weekly savings rate. A chart that tracks their progress can keep them interested and engaged in achieving their goal.
- PIGGY BANK VS CREATING A “SPEND”, “SAVE”, AND “GIVE” JAR
A piggy bank can be a great way to teach children the importance of saving while giving them an easy way to do it. The goal is to fill up the piggy bank with notes and coins until there is no room. Once the piggy bank is full, take your child to the bank to open up a savings account for them. Have them count how much money is going to be deposited, so they can have a physical understanding of how much money they have. Show them the final number and reinforce the idea of interest. It can provide a great source of motivation for your kids if they understand that their money will grow over time as long as they don’t touch it.
Another option is to show children how to divide up their money between saving, spending, and giving to charity. By instilling these habits while they’re young, it’ll be easier for them once they’re dealing with larger sums of money. The idea is to provide children with a bit of insight into how to budget money for their short-term savings goals and long-term goals — that way they’ll learn how to save separately for a new toy versus a more expensive item, like a new bike. If your kids are getting an allowance, break it down into R10 or R20 notes for example, and tell your kids that they have to divide their allowance in each jar. It’s up to you if you want to specify how much.
Once your children are ready, they’ll need a place to stash their cash. For younger kids, this may be a piggy bank. Older kids may want help to set up their own savings account at a bank. It’s a great money skill to learn to manage their own account.
- MATCH THEIR SAVINGS
A great first step is to match their savings. Just like your employer matches your retirement contributions, match whatever your child saves. You could offer to match a percentage of what they have saved, or you could offer a reward when your kid reaches a savings milestone, such as a R50 bonus for hitting the halfway mark. This can work for bigger purchases and will help them value their purchase more and appreciate how long it takes to save for a big-ticket item.
- HAVE THEM TRACK SPENDING
Part of being a better saver means knowing where your money is going. As children begin to spend and manage their own money, have them write down their purchases each day. Then at the end of the week, have them add up their spending. It can be an eye-opening experience. Encourage them to think about how they’re spending money and how much faster they could reach their savings goal if they were to change their spending patterns.
- LEAD BY EXAMPLE
Children learn by example, so the best way to teach them about saving money is to save money yourself. Have your own jar of money or piggy bank that you put money in regularly. When you’re out shopping, show your children how to differentiate between various prices and explain why buying one item makes better sense than another. Reiterate the message that every time you get paid, you save a portion of your salary to help prepare for the future.
If you’re a parent, making saving a regular part of your child’s routine can lay the foundation for a bright financial future.
There are quite a few fun ways to teach kids good money habits. By making money lessons fun and educational early on, we’ll create a generation of kids who can make sound financial decisions without fear.
