When it comes to building wealth and success later in life, there are few aspects more important than understanding the importance of saving money. Doing this early is incredibly important, giving your children the best chance of having a secure financial foundation down the road.
And don’t expect them to learn about it in school! Sure, there’s plenty of other stuff essential for later life that they’ll learn in the classroom – but when it comes to things related to money and personal finance, society leaves us to fend for ourselves, without providing any adequate understanding of basic finances in school.
It’s imperative to teach your little ones about money management early on because if you don’t, someone else will – which is a risk you don’t want to take, given how important it is for your child’s future.
In this post, we’ll cover a few simple, basic steps you can take to teach your child about saving and the value of money early on, setting them on the right track for later life.
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6 ways to teach children about saving
While teaching young children about money and savings may seem trivial to some, it could end up being the difference between a strong, independent child who purchases their first home in their 20s, to one who never seems to leave the nest.
This is because good habits are learnt young, and these habits will last through to adulthood, provided you do a good job of teaching them early on. Being good with money is one of those habits, and probably the one that most people struggle with the most. When it comes to life skills, it’s fair to say that if you can balance a check book, you’re most of the way there!
Right – so now that the introduction is out of the way, let’s get into it. Here are out 6 easy ways you can start teaching your children about money – what it is, why it’s important, and most importantly, how to save it.
1. It all starts with a piggy bank
The first step to putting your child on the road to fiscal responsibility, getting them to understand both the importance of money – and saving it – is to get a piggy bank. Tell them that the game is to fill their shiny new piggy bank full of money until it’s full, after which they can use their newly found wealth to buy what they want.
There are plenty of ways to encourage saving, especially for short-term goals. One way would be to picture what your child is saving for – whether it’s a new toy or other items – near their piggy bank. This will help incentivize them to save and keep saving until they reach their goal – helping to reinforce good financial habits.
There is no shortage of great piggy banks to choose from – especially if your little one is into dinosaurs, with plenty of excellent dinosaur money banks to choose from. You could also make it into a fun activity by selecting a paint your own piggy bank craft kit, which doubles up as a fun, creative activity to bond over with your little one.
2. Open up a bank account for them
Eventually, your little one’s piggy bank will be full, which is the perfect time to take your child to the bank to open their very first savings account.
The age you can do this will depend on the bank you decide to open an account with. Some banks will have minimum age requirements, while others won’t – in all cases, a minor will require a parent to open the account with them.
That said, typically, a piggy bang will suffice until your little one is six years old – at this point, introducing them to the concept of banking and opening their first savings account is a good option.
3. It’s important to keep your children invested
Perhaps the best way to help your children realize the value of money is to give them hands-on experience with it – not just spending it or saving it, but also earning it.
It starts by giving your child tasks and chores to complete around the home – these must be age-appropriate, of course – in return for pocket money, giving them their very first taste of working for their money.
Once they’ve earned it – let them spend, save, invest, or even donate it as they like. Giving them both a taste of work and the freedom to do what they want with the fruits of their labor, will do more than anything else when teaching your little one about the value of money.
4. Don’t just buy things – show them that they cost money
Getting your child to understand the value of money or more than pointing at a pack of toys and saying “this costs X dollars” – they need to be more involved in the transaction than that. Like most things, this comes from fostering and promoting a strong sense of independence regarding how they spend their money.
Letting them both see and own every step of the transaction will go a long way to helping develop their understanding of money and its value.
5. Teach them the difference between “needs” and “wants”
We all struggle with instant gratification from time to time in this materialistic world in which we live. However, if you’re to set a good example to your kids, you need to show restraint, leading by example to help set your child on the path of fiscal responsibility.
It’s our job as parents to teach our kids the word “No” – they can’t always have everything they want. Failing to do this, instead of giving in to every little whim that they have, will give them bad habits that will carry through and impede them later on in life.
One way to do this is to introduce the concept of budgeting to them – perhaps you could make them responsible for buying their own snacks, making it necessary for them to set aside some of their pocket money for this before they can go out and get that toy that they want, or even longer-term saving goals.
6. It’s important to lead by example
As we all know, children learn by example. This means for us parents that if we want to teach our children good financial habits – specifically about the importance of and how to save money – then the first step is to be good at saving money yourself.
Research indicates that children begin to form their money habits as early as seven years old, meaning it’s essential to set them down the right financial path early and doing what you can to ensure that you instill good spending habits.
For parents, this means living within your means. The last thing you want is for your little one to notice that every time you want something, you’re whipping out a selection of credit cards, racking up debt as you go. If they do, they won’t see this as bad behavior and will likely make poor decisions as adults, which wreaks havoc on their credit history and profile, making life much more difficult for them down the line.
Well, there you have it – six simple, easy-to-do tips you can use to help teach your child about the value of money, as well as the importance of saving it.
Teaching fiscal responsibility is best done at an early age, helping build behaviors and habits that will carry through into adulthood. As with all things, its parents must lead by example – so if you want your little one to have good financial habits, you must have these yourself.
Be sure to be patient – your child doesn’t need to be a financial wizard; they just need to start getting to grips with basic concepts – such as what money is, why it’s important, its value, and why you need to plan ahead when making larger purchases.
We hope that you found this article helpful and that you and your little one will start getting to work on building up a better financial understanding, setting them down the right financial path for later life.