Moonpreneur
Are you trying to secure your financial future by developing good money-saving habits? It is an excellent idea. Saving is a critical life skill that can be challenging to adopt, but it’s essential to set aside some money for future needs.
Shockingly, according to an Investopedia article, most Americans live paycheck to paycheck without saving money. This trap can be avoided by teaching children to establish good money habits at a young age. By encouraging them to set aside money every week or month, they can learn the value of controlling their expenses and avoiding unnecessary spending.
How would you do that?
Here are 5 steps to make your child hop on the saving bandwagon.
1. Discuss Needs Vs. Wants:
The first step towards teaching the children about saving is helping them establish a difference between needs and wants. Explain that shelter, food, healthcare, education, and basic clothing come under needs. While wants is a category that includes all the additions, such as movie tickets, candy, bicycles, the latest smartphone, and designer sneakers.
You may ask your children to look around the house to drive home this concept. For instance, you could point to items in the bedroom and kitchen and ask them if they are wants or need. This activity explains prioritizing expenditure and setting aside money for the future.
Recommended Reading: Top Money Management Lessons for Kids
2. Allow them to earn their own money:
Most parents give their children pocket money or allowance, but if you are serious about inculcating saving habits in your child, encourage them to earn and save their own money.
They don’t have to leave the house to earn money. You can offer them a reward for helping out with household chores such as maintaining the garden, keeping their rooms clean and organized, etc.
This will teach them the value of money and hard work.
3. Encourage them to track their spending:
A good saver always keeps track of their expenses and knows where their money is being spent. Either you can ask them to keep a logbook, or you can opt for saving apps such as iAllowance or Savings Spree.
Encourage your children to track their expenses to become aware of where their money is going. This exercise will help them consider their spending habits and how they can achieve their financial goals. Additionally, teach them ways to modify their spending patterns accordingly.
Recommended Reading: Why should children learn money management?
4. Offer savings incentives:
In the United States, many employers offer retirement plans that include matching contributions from the employer. This is why many people choose to save in their retirement plans.
If you have difficulty motivating the children to save money, use a similar principle to ramp up your efforts. If the child has set a huge goal for a $500 purchase, you can offer them a percentage of what they have saved. Another thing you can do is to offer a reward if your child reaches a milestone in their savings, such as a $40 bonus for reaching the halfway point of the milestone.
5. Become their creditor:
If your child is looking to buy something with a price tag of $100, you may lend them this amount. But ask them to repay this money from their allowance in the next four months.
This will teach them a valuable lesson about saving money. They will learn the significance of saving and delaying gratification, which can lead to the desired item being purchased at a lower cost.
Afterthoughts
It is crucial to instill saving habits in children early. Since children tend to learn by observing, therefore, aside from teaching them about the value of saving, you must set an example by practicing what you preach, or else it could have adverse effects.
Moonpreneur is on a mission to disrupt traditional education and future-proof the next generation with holistic learning solutions. Its Innovator Program is building tomorrow’s workforce by training students in AI/ML, Robotics, Coding, IoT, and Apps, enabling entrepreneurship through experiential learning.
