According to a survey by Bankrate in 2017, only 4 out of 10 Americans have savings that they could rely on in case of an emergency. This makes 41 percent of the adults. This is worrying because most people don’t have some savings tucked away. Saving should be a culture. Children should also not be left out, teaching them at an early age helps form an excellent saving pattern for them.
We all know how important your credit score is if you intend to apply for loans. It’s important to ensure that once your children grow to a stage, they can understand credit reports, you explain in details on the dos and don’ts. You could even refer them to https://letmebank.com/ for more information. So how exactly do you teach your children to save money?
1. Distinguish between needs and wants
The most essential step to teaching the kids on saving is helping them distinguish between wants and needs. Have a sit-down with them and have a one-on-one with them. Explain to them that needs are basics such as food, clothes, and shelter. On the other hand, wants are the other extra stuff.
Be open and tell them how wants should not be a priority. If possible, have your budget with you so that you can show them that needs are a priority.
2. Devise ways of making them earn some money
This has been a debate for a long time; to pay or not to pay kids after chores? Well, neither is wrong. However, giving them some allowance when they do tasks could be a motivating factor to do them. Not that I mean every time they do them you give them money, no.
Once in a while surprise them with some money to show appreciation. Find creative ways of making them earn money. Whether it is tidying up their bedroom, putting away their toys or helping you declutter the laundry area, all this works for the better.
Being a creditor can also help them learn the art of saving. Let’s say, for example, they need some cool watch going for $100, but they only have $30 at the moment. You can ‘loan’ them on condition they return with interest.
Such a move helps them understand that saving towards their goal is better because they will not end up paying for more.
3. Get a piggy bank
A piggy bank is a great starting point. The goal should be for them to fill up the piggy bank. Help them know that it is a way for saving for the future. Also, the end goal is helping them save for something they really want such as a toy or a comic book.
Teaching them to save helps them grow up knowing that not all they money they receive should be spent. Some should be kept for a rainy day.
4. Tracking their expenses
Introduce the concept of record keeping. In case they receive $20 weekly, help them note it down. Help them understand that any time money comes in and goes out, there should be a record. Even during purchases, help them tabulate what they’ve spent the whole week and the balance they have.
Children also need to understand their spending habits. Get to make them see how much they are spending and how that deters them from reaching their saving goal. Find ways for them to change their habits as this will help know that their spending habits affect their savings.
5. Be an example
Kids are quite quick to learn and pick up habits. Teach the art of saving by being an example. Get your own ‘piggy bank’ as well and save regularly. When going shopping, take them with you. Make them see you having a shopping list and sticking to it.
Compare the prices of various products and explain to them why you choose a particular product compared to the other. It could be the price is slightly lower.
6. Don’t prevent them from making mistakes
As a parent, it’s normal to feel like you want to step in when your child makes a mistake. However, letting them be in control of their money is making them learn from their mistakes. Once they make a mistake, point it out. This is a brilliant way of learning what they should not do with their money.
Communication is vital in this whole process. Have a regular check-in to go over their progress. Find new stuff you can teach them. These discussions help you to understand each other, and they end up bringing you closer.
Everybody wants what is best for their kids. Teach them the art of saving and watch them become financially stable. As they grow up, you could also introduce the option of investing.