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Kids and Money: Shaping-up a Young Saver
Kids who are aware of the purchasing power of money need to be taught about the importance of saving it too. The Money Times advises how you can instill this habit.
Wed, 11/03/2010 - 13:25 by Gunjan Mehra
Saving might appear to be boring at first, but once your child start using it to buy their priced possessions, they will be quick to realize that savings are like the jelly-custard pudding that can be enjoyed only if you have patience. If your children are getting an allowance, it’s time to dole-out some lessons on the importance of creating savings too. That’s the only way to teach them wise spending.
Children and Decision Making
- Introduce your children to decision making skills in the early years of their childhood to shape them into more mature individuals who are clear about what they want.
- Give your children plenty of choices and allow them to pick and choose what they want.
- Make use of every opportunity that you get to instill decision making skills in them. Be it a visit to a mall or a restaurant, let them make their own choices.
It is also equally important to make them realize that since they are deciding for themselves, they are fully responsible for what they choose.
- When it comes to money, you can give them the liberty to spend their allowances as per their wishes. However, it could be a good idea to keep a eye on how they use their money so as to be able to stop them from getting into wrong habits if need be.
- It is never too early to teach them responsible decision making.
There is no ideal age to start teaching them the importance of creating their own savings. You can start these lessons as early as you start giving them their own money to spend.
The graduation of your kids from a piggy bank to a savings bank account should be marked with some of the finest lessons in financial management that they can use all through their lives.
Here are some ways in which you can help your child realize the importance of saving and also help him generate some of his own
1. Allocate Allowances
There cannot be savings without money and therefore allocating suitable allowances to your children should be the first step in helping them create their own savings.
When you allocate allowances, you should also help them assign money for their various requirements. Remember to give them a realistic allowance that leaves room for savings after catering to their needs.
To begin with, buy them a pouch with several pockets. Make them mark each pocket with headings such as – food, candies, toys and so on. Remember to reserve one pocket for savings.
Now divide their allowance suitably between all the headings including 10 percent, which goes to savings.
2. Buy Them a Piggy Bank
You could also make your 4 or 5-year-old buy a piggy bank of his choice at the beginning of each year.
This ritual should help in generating his interest in the act that will pave way to becoming a desirable habit called saving.
Explain your kid that he needs to save to be able to afford buying the toy that he has been eying for months.
If he can do basic mathematics, make him do addition at the end of every month to find out how much more needs to be put in to reach the goal. If not, you can help him in keeping track of his savings.
Remember, a 4 or 5 year old can easily loose sight of his goal if it is a long term one. So, it could be more prudent to set a monthly saving goal and not for 3 months, a year or more.
3. Involve Them in Household Budgeting
As your children grow-up, it is a good idea to start involving them in your household budgeting. Kids in their middle school have a fair enough idea of the purchasing power of money and are also old enough to handle it responsibly.
You can hence allocate them the responsibility of handling expenses for certain specific purchases, say your weekend outings or groceries.
This should help them understand, through first hand experience, the value of money and thus make them more money-wise. Once they start appreciating the basic underlying economics that wants are more and means limited, they will be in a much better position to understand the significance of savings.
4. Open a Bank Account
A 10-year-old is mature enough to be explained the operations of a bank and its role in our lives. By this age your child would have discarded his earlier impression about ATMs that they were friendly giants that spelled money when needed.
Take your kid to a bank and help him fill the required forms to open his first savings account as also a new chapter of modern money management in his life.
The bank’s customer care executive can help your child realize how his money can grow when he decides to save a part of it. You could also consider getting him a time deposit of say 3 months, since he would not be needing the amount for some time in future.
He could subsequently also be explained the various investment options available to him so that rather than keeping his money idle, he invests it and earns greater returns on it.
Saving might appear to be boring at first, but once your child start using it to buy their priced possessions, they will be quick to realize that savings are like the jelly-custard pudding that can be enjoyed only if you have patience.
