Why it’s a good idea to teach your child to save money?
There’s plenty of skills that our kids won’t learn at school. For example, the habit of saving and sensible Money management is the easiest to be developed by the Parents. A good choice to learn how to save Money is the beginning of a new school year.
The youngest kids should start their journey through the world of finances with a regular piggy bank, or better yet two. For a teenager, a good solution will be opening a teen bank account. It’s also a good idea to talk with children about Money, about spending and saving.
Where to start?
Every parent is perfectly aware that children are easy to get discouraged, which is why, when setting up the first GOAL with the kid (buying something) we need to suggest it should be something cheaper, so that they can get it fast.
At the start of the road called Savings, it’s a good idea to get a transparent jar that will allow the child to observe how much Money is inside. Therefore, we can clearly see it get filled up or emptied. Most children will be more interested in learning about Money if they learn that it’s a type of fun.
We choose products that our child knows and enjoys. And what do kids enjoy the most? – The answer is simple, candy. All you have to do is put together the favorite candy bar or a bag of gummy worms. When you hold them together, ask the child what do they want? 1 candy bar or a bag of gummy worms they could share with someone.
What do you think they will pick? Yes, it’s gummy worms, because despite liking candy bars they will start analyzing that there is more of them, which means they will last a few days at the same price. Then put together a chocolate bar and a few bananas, yet another time make it a pack of lollipops and a bag of chips.
What the child will choose is not the most important thing here, what does matter is they will understand that they have to make a choice, they can’t just have everything they want.
A penny saved is a penny earned
In terms of financial Education, an important thing is to encourage children to regularly save away part or all of their allowance to achieve some goal they desire, like buying a book, a toy or a game. The selected goal, however, should be in line with what the kid wants and involve something they want or something they can’t go without.
The ability to finance their coveted purchase on their own will make the child appreciate the purchase more, and thus learn about patience in pursuing a goal. When it comes to bigger expenses – such as a new bike, electronic appliance or going on vacation – Parents may offer to cover part of the expenses.
The additional “motivation to save” might be reinforced by bonuses for achieving specified goals, i.e. every time the child saves away part of their monthly allowance, they will get extra cash from Parents. At the same time, in order to be able to watch the Savings grow, it’s a good idea to present the child with a piggy bank or a wallet to store their Money in. When it comes to older kids, a good solution is to open a bank account.
Time equals Money
The greatest ally of young people is time. When starting to make Savings for the purpose of making their dreams come true in the Future, young people have several decades of systematic saving ahead of them. That way they can spend a small Amount a month for that goal without putting a strain on their budget.
The sooner they start to save, the bigger funds they are going to accumulate in the Future. What matters, though, is for it to be systematic. If the process is also supported by a properly selected investment tool, a compound interest effect will be achieved, which means that the base capital will be regularly increased by a specific Amount. One has to remember, though, that individual solutions available on the market differ in their structure, level of risk, interest rate, or even the tax aspects.
For that reason, before choosing the right product for ourselves or our child, it’s a good idea to consult an advisor who will help choose a solution that suits the individual needs and the investment profile.