How can I inculcate a habit of saving in my young children? I have two sons who are 10 and 13 years old.
Saving is, indeed, a fabulous habit and teaching your young ones at a very early age how to be financially savvy will help them to understand the importance of money and savings. While there is no ideal age to introduce saving habits to your children, they can be taught gradually once they turn five, as that is the age at which they begin to understand the concept.
Children must learn that money has value and they should be clear on the concept that money must be earned and once they spend it, it is gone. Another very important lesson they need to learn is how to differentiate between wants and needs. These understandings are crucial for developing upright money-management skills. We need to teach our kids about the four quadrants of money management: save, spend, invest and donate. This develops their sense of control over their money and they gradually become confident enough to manage it on their own.
Children love to be creative, so use this characteristic of your child in a way that adds to their financial learning skills. For example, instead of spending money on buying expensive birthday presents, ask your children to create the gifts on their own. Motivate them by offering monetary rewards, when they design gifts or when they indulge in a responsible activity. Also ask them to apportion the rewarded money among pots marked ‘save’, ‘spend’, ‘invest’ and ‘donate’. When your child adds money to the ‘save’ pot, help him or her calculate how much they already have, talk about how much they want to reach their goals and by when they can accomplish this. This is fun for children and it gives them a sense of the value of waiting and being patient.
Teach them the important principle of delayed gratification – the lesson that occasionally they need to say ‘no’ to things they want now so that they can relish better things in the future. An instance that comes to my mind is when my five-year-old daughter asked if we could go to a local pizza restaurant and games parlour that she loves. I said no, but went on to explain to her that we can save this money for our vacation in a few months from now so that we can have even more fun on our trip.
If your child is old enough, give him or her money and a list of grocery items and ask them to go shopping. This will help them to learn how to buy necessities within an assigned budget. Alongside this, it will help them to reflect on the reality and outcome of buying according to priorities and within a confined budget, which will make them judicious about spending.
Believe me, we parents are the number one bellwether on our youngsters’ financial behaviour, so it’s up to us to raise a generation of thoughtful shoppers, savers and givers.