Collecting insects, climbing trees and playing dress up, children are full of creativity and adventure. So when the time comes to teach your child money management, why not follow in their footsteps with a fun-filled lesson plan they’ll never forget?
Because while your child might not be ready to invest in the stock market, it’s still essential to teach them the value of saving money. By encouraging them to make good financial choices now, they’ll develop skills and habits to help them stay on top of their finances later on.
So to help set your child up for financial success, here are the four best ways to teach them the value of saving…
Money is earned
One of the easiest ways to get your child off to a positive start with their finances is to instill the idea that money is earned through hard work. Give your child a taste of the real world by having them pick up small tasks around the house, like making their bed or tidying their room, in exchange for pocket money.
Once they complete their chores for the week and are paid for their work, explain that the money can be put toward anything they want, like a new toy. Hanging a chore to-do list in their room can keep them on track and help them feel more responsible over their jobs.
Successful people set goals
Whether you’re jotting down your five year plan or making your to-do list for the day, it’s no secret that setting goals can deliver big results. In fact, a study by Harvard Business Review found that 14% of people who had goals were 10 times more successful than those without them. Teaching your child to set financial goals will not only encourage them to practise patience, but it’ll remind them of how important it is to save, rather than spend – a habit that’s getting trickier to master everyday.
As the world takes strides toward becoming cashless and buy now, pay later (BNPL) platforms grow in popularity, overspending has never been easier. In fact, according to Mozo research, 64% of people confessed to spending more than they typically would, thanks to a BNPL service, while 1 in 3 admitted to missing a repayment.
Give your child a lesson in delayed gratification by helping them plan their first savings goal, like picking up a new video game. Sit down with them and work out how much they’ll need to put away every week to hit their target. It might also be worth workshopping a savings chart to track their progress to keep them motivated and accountable for achieving their goal.
Interest has two faces
As your child’s savings pile starts to grow, it won’t be long until they’re asking questions about interest rates. You’ll need to explain that interest comes in two forms and can either increase their savings or land them in debt. And what better way to steer them clear of debt than with a live demonstration.
Ask your child if they’d be willing to lend you $5, then in a couple of days give them back $5.50 and explain the extra 50 cents represents the cost of having to borrow the money, which banks call interest. While they might be excited to collect some extra cash, make sure they understand that any time they borrow money from a bank, they’ll have to repay more than what they asked for. So if they ever ask you for an advance on their allowance, you’ll be able to justify charging interest!
Saving goes beyond the piggy bank
From picking up their favourite books to downloading the latest educational programs, nothing beats helping your child learn. But when it comes to teaching them how to be smarter with their money, you’ll need to show them that saving goes beyond just making contributions to their savings account.
These days, being a savvy saver also means shopping around to make sure you’re getting best price. It’s important they get the hang of doing this now so that one day when they’re ready to buy their first home and start shopping around on mortgages, they’ll know how to haggle a good deal. According to research by Freddie Mac, the average borrower could save $1,500 just by getting one extra mortgage quote, while obtaining five more quotes promised potential savings of $3,000 or more!
But since it’ll be a while until they move out, start small by letting your child tag along on your next grocery shop to compare prices on the same products and help you to find ways to stretch your grocery budget further.