“Children as young as 3 years can understand financial concepts such as spending and saving,” says Beth Kobliner, an author at NY Times. Saving money is among the most crucial aspects of building wealth and securing a sound financial foundation. Given how important saving is, it’s surprising that schools don’t teach children about the same. Citing the overwhelming number of mortgage crises, debts and student loans, Kobliner says it is clear that adults do not know much about managing money. However, she adds that there are ways to empower the upcoming generation, which starts by teaching your children the importance of saving from when they are young.
Start with a piggy bank, then a bank
A piggy bank can be a significant way to teach your kids about saving while making it easy and fun. Tell them that the objective is to fill up the piggy with any amount until there is no room left. To add to their incentive, you can pledge a small reward for whoever fills their banks first. Also, emphasize that the piggy is for saving money for a better future and that the more they collect, the more their wealth will grow. Once the piggy bank is full, let your child accompany you to the bank to open up a savings account. While at it, allow them to count how much money is to be deposited so they can attain a practical understanding of how much they have, an exercise that boosts interest. Also, make it clear that their money will grow substantially if they don’t touch it.
Create a timeline and be their financial manager
Research has found that the impact of an hour-long financial lesson fades off after about 4 months. In order to make the message stick, money lessons should be timely and continuous. For instance, if you know that your kid receives an average of $100 on their birthday each year, the time to talk about budgeting and saving is when their birthday is around the corner. Also, when you create a timeline, it helps your child to visualize when they will hit their target.
Let’s say that you give your kid $10 per week and they want to save $100. If they saved at least 80% of the amount, they would reach their goal in about 12 weeks. You can oversee the whole process by getting a piece of paper and marking $0 and $100 on each margin. Mark checkpoints for 25%, 50% and 75% and whenever an amount is saved, draw a line to show how much it is. Additionally, add motivation to the course by letting them know that there is a reward at each checkpoint.
Teaching kids how to save money may seem tough, but using these tips, you can make your child’s understanding of finances fun and productive. Remember that children learn best by example, which means that you should also be saving. For instance, when shopping, show them how to differentiate prices and explain why purchasing a particular item makes more sense than another. Also, transform casual discussions to teachable moments- a usual question such as “are we rich?” can be handled in a way that emphasizes responsible spending and hard work. All in all, teaching your kids to save is a prudent investment that eventually pays the best interest.