We come across them all the time – kids howling away at the supermarket for their favourite toy, and parents trying to steer them away from the shelves, often with no luck. Money and finance are factors that kids are exposed to very early in life, a fried has a toy or gadget and they want it, without understanding the fact that it costs money.
While our parents would often reinforce the need to not overspend and save up for a rainy day, we tend to indulge our children by giving in to their demands, at times even putting ourselves under financial pressure, in the process. However, it is important to let your child know that they may have to go through different financial situations in their lives, and thus it is important to spend wisely and save up. And, there is no such thing as too young an age to learn about being financially responsible.
From explaining savings and money matters to toddlers in a fun way, to getting older kids to understand the importance of saving for the future, here are some tips on how you can teach your child about saving and spending wisely:
Allowance: In order to get your child to understand money, you can start by introducing them to different kinds of coins and notes. A great way to do that would be to start them off on an allowance on a weekly or monthly basis. You can start with a small amount, and add on to it as they grow – for example $ 10 for every year they grow.
Set a savings goal: For a child there is no better sense of achievement than being able to buy something with the money they have saved up. Hence, set a goal for them – their birthday maybe, and ask them to save up for that. You can draw a chart for them if they are small, and ask the older kids to design one themselves. This will allow them to track how much they have saved and spent, and what they need to work towards in order to be able to buy the item that they want. Make sure that these goals are reachable – start off small and encourage your child as they reach each milestone. To make it more fun, you can get your child to stick a picture of the toy/object they want on to the chart so that each time they look at it, they know what they are working towards.
Use piggy banks/savings jars: For smaller kids, a piggy bank or a savings jar would be a good idea to start the concept of savings with. As you give them their weekly/monthly pocket money, you can ask them to put an amount into the piggy bank. Let them know that the more they put into the piggy bank, the more they save, and thus the more money they will have.
You can also use a clear savings jar made of glass which would allow your child to watch the coins and money in it grow. You can also draw lines on the side of the jar indicating how the money has accumulated over time.
Open a bank account: Once your child is old enough and has saved enough money, you can take him/her to the bank and open a savings account. Most banks have children’s savings account which offer a minimum interest rate. You can ask your child to transfer the money that they have saved in their piggy bank on to the account. This is also a good time to explain the concept of interest to them, and get them to understand that the more money they put in to their account for a longer duration, the more they will earn as interest on it.
Teach them to save, spend and share: Encourage them to keep a track of how much they are saving, spending and giving. If you give them 10 dollars, ask them to save $ 5, spend $ 2.5 and donate $2.5 to charity. This way, you will be able to teach them to spend wisely, save up for the future, and share what they have with others. They can pick the charity they like and use the money they have kept aside to buy something to donate. For smaller children, you can use three money jars labelled save, spend and share, and ask them to put the money they receive accordingly. For the older kids, websites such as http://www.threejars.com/home are helpful to segregate their money. This then gives them the idea that they can spend a little, as long as they save up and share the money they have.
Introduce games like monopoly: Kids learn faster when they play. Board games like monopoly or the Game of Life teach us a number of things about finance and saving up. Financial discipline, the need to always have cash in hand, and how it is always not best to go for expensive things are just some of the financial wisdom that Monopoly can give us – in a fun and relaxed environment.
Take them shopping: The live experience of seeing you hand over money when you buy something will help them understand that you need to pay to buy. This is also when you can explain to them that you need to buy only what is necessary, and avoid indulging unnecessarily. A good way to help your kids figure out if they really need something is to get them to wait out a day and then decide the next day whether they still want it.
Allow your kids to do chores, and earn: Rather than just asking them to save up money they get from you or other relatives as pocket money, have them help you out with the household chores and pay them for their help. Pay them when they help you wash the car, mow the loan, wash the dishes or help around. They will respect the money that they have worked hard to earn.
Talk to them: As is the case with everything, having a conversation with your child about money and the need to spend wisely and save up is a great way of instilling money management in them. You can tell them about how you had saved up as a kid and bought your favourite toy with the money, or how you had managed to tide over a difficult period because you were careful while spending. You can also explain to them how the things we use every day – electricity, water, food cost money and how by avoiding wastage you can save up a lot. Ultimately, they should know that it is okay to talk about money and that it is not a subject you would shy away from.
Let them learn from their mistakes: As the old adage goes, failure is the stepping stone to success. As clichéd as it sounds, the fact is that we tend to learn a lot more from the mistakes we make, and the same applies to kids as well. If they have overspent and have not been able to reach their goal, explain it to them but also let them know that it is ok, and that they can work towards their goal the next time.
Be a role model: Regardless of what you to teach your children, they will finally learn from the example you set. Hence, avoid overspending when you are with them, do not indulge in every demand they make, and do not argue about money in front of them.
I am Emily Connor, 26 year old psychology student, and a content contributor at Quality dissertation help
My interests range from productivity, inspiration to reading anything motivational over the internet. I love dogs over cats and music over talking.