Saving money is one of the basic and yet most ignored financial advice that anyone can take. It requires discipline, and most of all, it comes with a certain amount of sacrifice. Warren Buffet, a certified investing guru, is one of the great examples of why teaching your kids about saving is crucial at an early age.
Warren’s first achievement happened when he was only six. He bought a six-pack of cola for a quarter and sold each can for a nickel. Such an act made him recognized by many.
Teaching your kids about saving will help them become responsible and well-disciplined in handling money.
If you are having a hard time showing kids how to have savings, here are the ten easy tricks to help you teach them.
Let them know the difference between wants and needs.
It is a pretty basic way to teach your kids about savings. Teach them that foods, shelter, education, and clothes are the things they need. While all the things they think they need, such as video games, the latest gadgets, and weekly shopping, are considered “wants.”
Show opportunity cost.
If your kid wants to buy a new car toy or video game, ask him if he wants to have it. Better yet, set an example and tell him that he won’t have the money for a new set of clothes he needs on his birthday if he buys a video game. By making this approach, your kid will be able to weigh which is essential or not. Also, it will further enhance their financial decision-making.
Instead of an allowance, give them commissions.
Many parents feel guilty for not providing allowances for their children at school. But in reality, giving them commissions for doing household chores instead of free allowances will make them realize the value of saving money. Let us show you a sample computation on how to give your kids commission fees for doing household chores.
· Take out the trash bag after dinner – $2
· Keep your room clean – $2
· Wash the dishes – $3
· Change bedsheets and put clothes in the hamper box – $5
You may opt to discuss with your children whether they prefer to get their commission fees daily or weekly. In this way, they would know how to be disciplined about their spending habit.
Present them long-term planning.
You can give your kids a head start by presenting them with long-term planning. It could be money intended for college, a house, and retirement. This way, they will know the value of hard-earned money and how they can start to save up for it.
This step has been an efficient way to teach them about savings. And such a strategy can be passed on when they have a family on their own when they grow up.
Set goals with them.
One of the efficient ways to teach kids about savings is to set goals with them. It would be best if you recommend them to set goals in certain months or a year. Whenever they have reached a financial milestone, a little celebration at home or giving them a surprise gift won’t break a bank. Encouraging them to set financial goals will let them analyze that they need to save more before they have saved up.
Create a savings account with a purpose.
Creating a bank account for the sake of saving money is a waste of effort. It is way better to allow your kids to have a purpose when saving money. Let’s say you encourage them to save money for their 18th birthday, enrolment for their high school years, or a room renovation.
Kids can be impulsive buyers because they know that you can shoulder their purchases and have a savings jar accessible. Creating a bank account will help them to:
- Teach them to plan and prepare for their future.
- To keep their eyes on the goal and see the importance of setting priorities.
- It opens their eyes to the things they love to buy until they can afford to have them.
- They will learn basic math and negotiation skills at their early age.
Lead by example.
They say practice what you preach. And you cannot teach your kids to save up if they can see that you are an impulsive buyer.
As the parents, you are the most and first visible role model in life. Being minimalist can show them that less is more. And they can quickly adapt to your money management concept.
Involve them in event family planning.
If you are to celebrate an upcoming birthday of a family member, let your kids be involved in event planning. Explain to them the budget you have allotted for the birthday celebration, from foods to prepare up to props and ingredients. Allow them to plan out and maximize the money for the things needed.
Showing them how to calculate and manage the budget properly will enhance their math skills. Somehow, involving your kids in event planning in financial terms would help them realize that celebrating their birthdays should not always be grand. For as long as you are complete and have foods to prepare, that would be enough.
Encourage them to track their spending habits.
Tracking the spending habits is one of the crucial things to teach your kids. They should know where their money is going. Have them take notes on every purchase they make and conduct a quick audit by the end of the week.
Tracking the spending habits is an eye-opener for them. It will help them identify where most of their savings are going. The next time they have determined which of their expenses have the major haul of their savings, they will realize if it’s the thing they need or want to have.
Encourage them how fast they will reach their savings goal if they track and change their spending habits.
Monthly review about their money goals.
After showing and explaining things about saving money, it is also better to review their money goals.
Let’s say your child made a goal to buy a book after two months. As their guide, set a schedule (weekly or monthly) to review their progress. Doing such a thing will help your child determine how much they have saved and spent in a week. It will keep them aware and have a clearer vision of achieving it. Thus, it will motivate your kid to hold and control their spendings.
It’s quite a challenging task to do as a parent. However, both of you and your kid will benefit from it. You, as a parent, will be reminded to handle your finances while your child will grow as a well-disciplined and responsible person.
But don’t forget to explain about risks attached to money. You can give them simple life-situations like facing emergencies in times of tight budget.
Make it clear to your kids that they can choose to borrow money ONLY if needed. That said, your kids will develop strong decision-making skills as they grow.