Saving
Saving For Children
Teaching savings for children is one of the crucial lessons that you will teach your child, your child’s ability to understand how money works will determine how successful they will be in the future. This is why it is so important that you focus on teaching them good money habits from an early age.
To get your child to pay attention to what you’re trying to teach is often a challenge, so timing is going to be very important. Listen for clues in the words or actions of your child, so you can get an idea of whether they are ready to learn the lessons of money. In my opinion, children may not be interested in money but they do have strong desires – very strong desires! In my opinion children save money best when they are focused on a goal that they badly want. They want that new toy that their friend has, it’s something they must have – use this as a an opening to developing saving goals.
Savings Goals
Turning your child’s desires into saving goals is a perfect opportunity to teach a valuable lesson – rather than just forking out your own wallet and buying it for them, a better approach would be to introduce the concept of pocket money and let you child slowly save for what they want. This will force them to think about whether their buying the right toy, perhaps they’d rather spend the money on a new bike? What you will be teaching them is the value of money – a lesson that will serve them well in the future.
I can’t emphasise enough how important saving goals are, they should definitely be encouraged. For example, let’s say your daughter has her heart set on going to the Lady Gaga concert, encourage her to put concert posters in front of her bedroom door – make sure they focus on the goal.
Tracking Their Progress
Once you have their goals set, they next step is tracking their progress. Perhaps putting a progress chart on the fridge, so that your child can see how close they are to achieving their goals. You could even provide more incentive, by possibly making a deal that if they save up $X in 2 months you will match they savings dollar for dollar. By doing this you will be encouraging discipline – and this is what savings for child is all about.
Compound Interest
Once your kids are comfortable with the idea of savings, the next lesson for them to learn is how compound interest works. Make sure you impress on them how powerful this concept actually is, by showing them what exponential growth would do to their existing savings. Show them difference between just keeping their allowance in their piggy bank compared to having it in a high interest savings account.
There are many savings accounts for children which don’t even charge service fees. What I’d recommend is that you help them set up two bank accounts, a checking account (for spending), and a high interest savings account which ideally should be rarely touched. To top it off, their pocket money is now going to be deposited directly into their checking account to encourage them to become familiar with electronic banking.
My final suggestion, is that once they are comfortable with managing their own bank account, get them to set up a regular savings schedule, set up a scheduled transfer into their high interest savings account and get them to stick to their plan – it’s much easier to save when you’re never given the opportunity to spend it in the first place!
Teaching your kids how to save money is one of the lessons that you will teach your child, your child’s ability to understand how money works will determine how successful they will be in the future. This is why it is so important that you focus on teaching them good money habits from an early age.
To get your child to pay attention to what you’re trying to teach is often a challenge, so timing is going to be very important. Listen for clues in the words or actions of your child, so you can get an idea of whether they are ready to learn the lessons of money. In my opinion, children may not be interested in money but they do have strong desires – very strong desires! They want that new toy that their friend has, it’s something they must have – use this as a an opening to developing savings goals.
Turning your child’s desires into saving goals is a perfect opportunity to teach a valuable lesson – rather than just forking out your own wallet and buying it for them, a better approach would be to introduce the concept of pocket money and let you child slowly save for what they want. This will force them to think about whether their buying the right toy, perhaps they’d rather spend the money on a new bike? What you will be teaching them is the value of money – a lesson that will serve them well in the future.
I can’t emphasise enough how important saving goals are, they should definitely be encouraged. For example, let’s say your daughter has her heart set on going to the Lady Gaga concert, encourage her to put concert posters in front of her bedroom door – make sure they focus on the goal.
Once you have their goals set, they next step is tracking their progress. Perhaps putting a progress chart on the fridge, so that your child can see how close they are to achieving their goals. You could even provide more incentive, by possibly making a deal that if they save up $X in 2 months you will match they savings dollar for dollar. By doing this you will be encouraging discipline – and this is what savings is all about.
Once your kids are comfortable with the idea of savings, the next lesson for them to learn is how compound interest works. Make sure you impress on them how powerful this concept actually is, by showing them what exponential growth would do to their existing savings. Show them difference between just keeping their pocket money in their piggy bank compared to having it in a high interest savings account. What I’d recommend is that you help them set up two bank accounts, a checking account (for spending), and a high interest savings account which ideally should be rarely touched. To top it off, their pocket money is now going to be deposited directly into their checking account to encourage them to become familiar with electronic banking.
My final suggestion, is that once they are comfortable with managing their own bank account, get them to set up a regular savings schedule, set up a scheduled transfer into their high interest savings account and get them to stick to their plan – it’s much easier to save when you’re never given the opportunity to spend it in the first place!