Everyone grows up and finds themselves struggling to manage their personal finances. Even college graduates and professionals struggle to manage adulthood never having been taught the basics of money management or having developed a savings habit. Unfortunately, more often than not by the time adults learn the importance of saving or debt avoidance, it’s somewhat too late. Children are meant to be sheltered from “grown-up” things like finances, but as a parent, teaching your children about the importance of early savings is a lifelong gift you can give them. However, teaching children about money management is easier said than done. No child wants to hear that they should save their money rather than spend it.
That being said, there are so many ways to teach kids the importance of developing a savings habit, which is the first step in learning how to manage your money.
Discussing Wants vs Needs
Being a child that is supported by their parents, chances are that most of their “needs” are actually wants. By helping them clearly see the difference between wants and needs, as adults they will be able to prioritise their needs over their wants when it comes to money. This can be done by showing them the basic needs of a human e.g. nutritious food, shelter, security, and that everything else is simply wants. You should also allow them to see that wants are important as well in improving their happiness, and that needs go beyond simply the basic human needs such as vacations and self-treats that help boost mental health.
Offer Incentives for Savings
No other method works better on children than positive reinforcement. By matching their savings amount at the end of the month thereby helping them reach their savings goals faster, it will motivate them to set higher savings goals and continuously save.
Give Them a Fun Place to Keep their Savings
Nothing bores children more than talking about banks and savings accounts. If they can’t see their little pile of treasure building up, they will quickly lose interest. The best solution for this is to give them a fun piggy bank or a saving container. There are so many quirky gadgets out there that encourage children to put notes and coins in regularly. Before they or you know it, they’ll have had so much fun dropping their money in, that they’ve got a nice little stash of savings for kids.
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Talk About Money
A lot of parents shy away from talking about money in front of their children but this isn’t a good practice. By being open and honest with your children about how you spend your money and what things you can and cannot afford, children will learn about the practicalities of money. Have regular discussions with your children about how banks work, about interest, loans, retirement accounts. Entering adulthood with the basics of how money works is a definite advantage for your children as these are crucial life lessons that many parents neglect to teach their children
Let Them Manage Their Own Money
By giving your children an allowance (the value doesn't matter), they will be able to practically learn how to save and spend their money. If there is something they wish to buy, help them earn their own money by doing odd jobs around the house and match their savings, and let them buy it on their own. Buying something you want with your own money makes that item that much more valuable. It’s not enough knowing how to save money, learning how to earn and spend it wisely is also a huge part of financial management.
Set a Good Example
No amount of verbal teaching and advice will work on your child if you don’t practice what you preach. If you urge them to save and they see you splurging massively and having to frantically borrow money to meet unexpected expenses, they would follow suit in your footsteps. Therefore, when you have impressionable young children, it’s very important to make sure your actions match your words.
Teach Them How to be Generous
When teaching your child about the value of money, it’s important to make sure that they also understand the importance of generosity and good ethics. Earning and saving money at the expense of others is not a good habit. Too many adults prioritise money above everything else, becoming greedy and unscrupulous. By showing your child how good it is to donate money and help others through charity and good deeds, your child will grow up to understand that life is not all about money and that money is but one way of facilitating your life and helping others.
While it is very important that you should know and educate your child about the importance of early savings for kids, keep in mind that they are, after all, still children. They have a lifetime ahead of them to worry about money and how to earn and save it. It may be your duty to instill good savings habits in them, but allowing your children to remain sheltered from the unpleasantries of the real world will be more valuable than anything else.