Learning how to save money is one of the most crucial aspects of becoming financially stable. However, a lot of us only learned about this after trial and error, and a lot of bad money decisions. We wished we’d known better and earlier in life.
You can help your children avoid the same pitfalls by teaching them early on the importance of saving money.
Here are 5 tips to start their habit of saving money at an early age:
1. Use savings jars
When your kids have been begging you for months for the newest action figure or the latest Nintendo game, use that opportunity to tell them to save up for it. Give them a jar for each of their dream purchases and offer them a small weekly allowance in small denominations to encourage savings.
For example, if you allot a $5 allowance a week, give it to them in $1 bills. They can choose to save all their cash for one specific purchase or contribute to different jars for their various savings goals. You can also print a picture of their desired item or toy on the jar so they have a visual reminder of what they are saving hard towards.
2. Start a piggy bank
The good old piggy bank is a great way to get your kids started on the importance of saving money, without all the fuss of big banks. Tell your kids that the goal is to feed the piggy until it’s full of coins. Communicate to them that the purpose of a piggy bank is to save money for the future and that the more they save, the more their money will grow.
3. Open a bank account
Once your kids fill out a piggy bank, take them to a real bank this time and help them open a savings account. Let them count how much money is to be deposited, to help them gain a tangible understanding of how much money they have.
Have them take note of the total amount and emphasize the idea of interest. This will be a great motivation for your kids as they understand that their money will grow over time so long as they don’t take it out.
4. Create a timeline
As a child, the concepts of money and it growing over time can be pretty hard to grasp. However, it’s important to give simple money lessons to your kids as early as possible and it should be done consistently. If you know your child will receive a $30 gift cheque from his favorite uncle on his birthday each year, make sure to sit down and talk with him about budgeting money before he even receives the cheque.
It’s also helpful to create a timeline that will help your child visualize when they will reach their savings goals.
For example, they decide to work towards saving $50. They receive a weekly allowance of $5. If they save 100% of their weekly allowance, they will have reached their goal by the 10th week, roughly 3 months.
To illustrate this, get a long piece of paper and a marker. Write down $0 on one end and the savings goal ($50 for example) on the other end. Draw checkpoints on the paper for when they reach 25%, 50% and 75% of their goal.
Each time they save an amount, draw a mark on your timeline depicting how much was saved. You can also implement a reward system for each checkpoint. These tips will encourage them to keep going and also have a visual understanding of how their money is growing.
5. Lead by example
Kids learn through what they see, so it’s important to model financial discipline as parents, too. Get your own jar of money that you put funds in regularly. When you’re out shopping, even just for groceries, show your kids how to look at prices and decide why buying this item makes better financial sense than the other.
Emphasize the concept that every time you get paid, you have to save a portion of it to prepare for the future. Teach them why and how you are saving for their education.
Read the full article by Wind Gate Wealth here for more tips on how to teach your kids the importance of saving money.