Teaching your kids, the importance of saving money is one of the most important aspects of building a financially secure future for your child. Saving early will lead to happier, healthier and less stressful life for them – and for you! Finance is rarely discussed in schools, with many of us having learnt the importance of saving money through trial and error and experience.
Learning to effectively manage and value money is an important life lesson. Your child will be faced with many financial decisions in life, from student loans to mortgages, as well as the temptations of credit cards and personal loans. By instilling strong financial habits early on, your child will be better prepared to deal with common life challenges and set up to make the intelligent financial decisions.
We all want our kids to be financially responsible and teaching your kids from a young age to save, is a key part of money management. Once your children reach four or five years old, they are likely to be ready to begin learning about money, its value and how to manage it responsibly. The trouble is, finance isn’t always the most exciting topic to approach your kids with because let’s face it – children aren’t interested in sitting down for a lesson in economics! Giving your kids their own money to handle, whether earnt in allowance or by helping with daily chores, helps them to learn where money comes from and how it can be used. Looking for tips on how to encourage your children to save money? Discover our 5 effective ways to show your kids how to save.
1. Start with a Piggy Bank or Money Box
Popular since the 20th century, a piggy bank or money box can be a great way to teach your kids the importance of saving, while giving them an easy way to do it. Explain to your kids that the goal is to fill up their piggy bank or money box with coins, until there is no room left. To illustrate that the piggy bank is for saving money for the future, give them a personalised money box that is engraved with their name or end goal. Not only will these engraved gifts make charming additions to their rooms, but this will make their money boxes feel personal to them. Show that the more they add to their piggy bank, the more their money will grow.
2. Spend, Save, Give Jars
A creative way to help kids manage their money responsibly is to encourage them to split their income (pocket money) in three separate jars. One jar is allocated to spending, another to saving and the remaining jar to giving (i.e. charity). Discuss with your child how much of their money will go to each jar.
The ‘Spend’ Jar – For immediate wants such as small fun items or pocket money for an outing, such as to the beach or to the cinema.
The ‘Save’ Jar – For long-term spends or purchases. The item should be achievable within a certain time frame. Too long and your child is likely to lose patience with this method of saving. Encourage your child to attach a picture of their desired item to the jar as a way of motivation.
The ‘Give’ Jar – For donating to a charity or putting towards a gift for another person. The give jar is excellent for teaching your kids about sharing and caring for others.
3. Apply interest on savings
Sometimes it’s hard to explain to kids the difference between spending and saving to spend. By applying interest on your child’s savings gives them that extra incentive to save their pennies for longer. Agree to add interest on any money your child has contributed to savings every month by an agreed percentage. For example, if you add 10% interest to your child’s savings and they’d saved £20 that month, you’d contribute £2 to their fund.
4. Lead by example
Have your own savings jar and show your child that you’re adding funds to this regularly. Let them know that every time you earn money, you’re setting a portion aside for the future. Whether a rainy-day fund, a holiday fund or money for a special day out, we’ve got loads of great money boxes for adults too!
5. Let them manage their own money
Here’s where tough love comes in, as kids learn by what we do not what we say. If we as adults demonstrate lack of self-control when it comes to spending and make unwise choices with our own money, then our children will pick up those bad habits. By letting your kids spend their money however they decide, you are allowing them to learn from poor decisions and mistakes.
Talk to your kids about how you manage your own money. Explaining where it comes from, how it gets spent, and how it is budgeted. Getting them involved with the weekly food shop in a great way to demonstrate how to be wise with money. Give them £5 to spend on 3-4 items on your shopping list and show them how to compare prices to get the most for their money. The more you can involve them in everyday money choices the better equipped they will be to manage their own money responsibly into adulthood.
Incorporating creative saving methods with engraved gifts like a personalised money box or DIY spend, save and give jars, really help to encourage your child to save and spend wisely, setting your kids up for a brighter future.
Are you teaching your kids to be responsible with money? What are your best money saving tips for your children?