Photo by Jordan Rowland
Originally Posted On: https://livingwellkids.com/2020/04/21/teaching-children-importance-of-saving-money/
Knowledge of financial skills is important in helping you navigate life. Those financial skills involve saving and investing. However, our schools don’t teach our children how to best handle money. Thus, you must teach your children how to master these skills. With more and more young teenagers making money, it is your responsibility as a parent to make sure that your child handles it the right way. Kids saving habits is an important habit to instill in your young one. But exactly, why is it important?
Importance of Teaching Your Kids Saving Habits
It is much easier to teach a child than it is an adult. In fact, reports show that children as young as three years old are capable of grasping financial concepts such as saving and spending. Furthermore, researchers at the University of Cambridge proved that kids saving habit are formed by age 7.
So, don’t wait till they get older for you to start teaching them these skills. The sooner you can start teaching them, the better because they can start making smart decisions at an early age. Plus, teaching them these skills makes them immune to social pressures of spending.
First of all, teaching kids saving habits will give them the necessary tools to become financially free. As a parent, you never want to see your children working so hard only to earn the minimum wage, then spend it all on the new supreme sneakers. That’s why you work hard to try and give them a better life than the one you had. It would be a shame for you to give them a fortune only for them to squander it all.
Reasons why we save as adults it to help give us a cushion when faced with an emergency, retirement, investing, and education for our young ones. The sooner your child realizes these truths, the sooner they become financially free.
Statistics have shown that generational wealth is usually lost by both the second and third generation. Simply because these children were not exposed to the right saving habits. So, teach your children the right ways to save, and they will never step out of these teachings.
Secondly, saving helps your child to develop budgeting skills. Budgeting is one of the most important money management skills out there. If your child allocates a certain amount of money to saving, the amount left can be used for other things. Teaching them this principle at an early age will help them to apply the same knowledge when they start earning a salary. So, it’s never too early to start teaching your children money saving habits.
How Can Teach and Maintain Kids Saving Habit
Teaching your kids how to save is an important lesson that will impact their lives forever. Here you will find ideas on how to get them on board when it comes to saving. You will also get pointers on responsible spending and investing to ensure their financial success.
You might think that you cannot teach your kids how to save because you are not wealthy. You could not be more wrong; there are many alternatives when it comes to saving. You must start whether it is with a dollar or one hundred.
Open a bank account
To foster kids saving habit, you might need to start with a piggy bank or a savings jar. As the kids get older, open a bank account at a credible financial institution. Sign them up for internet banking or mobile banking so they can monitor their account. This will help them retain the excitement of their contributions.
Establish short term goals
Kids saving habit is encouraged easily by short term gratification. Children might have a hard time understanding why they will need money for a house. Helping them save for something so abstract may pose a challenge, and they will soon lose interest. Therefore start by telling them to save for the doll or toy car they would like. This short term goal will ease their transition to long term goals.
Make it fun
Delayed gratification is worse in kids as it is in adults. Therefore, find savings challenges that the kids can adhere to. You can also fit in rewards if they achieve the desired outcome. This will keep them on track of things and reduce boredom. You can also do the challenge together or in the competition to bond through the experience.
Emphasize the time value of money
Teach your kids how compounding works. You can show them how it works by incorporating a real-life test. There is the ‘doubling pennies’ experiment which is an excellent tool for making them understand. In this experiment, you put a penny on one checker box, and you double it up every day.
Kids can quickly learn through real-life examples, which is a great place to start.
Introduce budgeting for older kids
Money management is one of the must-have skills in today’s era. Too many people do not have the discipline to manage their spending and therefore end up not saving. You can easily employ ways to help them understand the difference between needs and wants. Then show them how to prioritize their needs.
This may pose a bit of a challenge at first, but with time, they will get to understand the concept of kids saving habit.
Be a good example
Being a financial role model is the easiest way to show your kids the importance of saving. If you have good financial practices, chances are your kids will adopt the same skills. Be a positive reinforcement of saving for short term and long-term goals, and they will follow suit. Make sure you engage them in the budgeting, planning and saving practices.
Every parent uses different approaches when it comes to saving. There are a lot of methods to incorporate to help your child save. There is no one size fits all procedure, therefore do not hesitate to be creative.
Different households allow a certain level of exposure when it comes to financial matters of the family. You can draw the line up to where it seems appropriate. However, involving your kids in family savings and spending will expose them to very fundamental lessons of saving and investment.