Your children may be young, but this doesn’t mean that they don’t have their personal goals and things they want to achieve. Depending on their age, they may want to buy new clothes or accessories, get a new gadget, or even travel with friends.
As such, it’s important to teach them valuable soft skills like how to save money. Doing so can help your young ones develop a sense of responsibility and accomplishment. This practice prepares them for the future, setting the foundation for sound financial habits that will benefit them throughout their lives.
Here’s how you, as a parent, can help your child set and achieve this financial goal for themselves.
Identify the Goal
Knowing exactly what they are saving for and how much they need to set aside can be a powerful motivator for kids. It can be anything and everything, from a new video game console to a staycation in a hotel. By setting a clear goal, they can visualize the reward of their savings. To make this process engaging, sit down together and discuss with your child what they would like to buy or do. Such a discussion gives them a personal stake in the saving process and makes the goal more tangible.
Create a Savings Plan
Once the goal is set, break down the total amount into smaller, manageable savings goals. An approach like this makes the process less daunting and more achievable for kids and adults alike. If the goal is to buy a new smartphone or toy for Christmas, calculate how much your child needs to save each week or month to reach their target. Create a simple chart or calendar to track their progress. This method imparts to kids the importance of planning and consistency in achieving long-term goals.
Use a Visual Savings Tracker
For younger children, visual aids can be incredibly effective in teaching about saving money. As a simple first step, you can create a savings chart or use a clear jar where your child can see their money accumulate. Each time they add money to their savings, they can mark their progress on the chart or see the jar filling up. The use of visual representations like charts and graphs reinforces your child’s progress and makes the concept of saving more concrete.
Open a Savings Account
On the other hand, tweens and teenagers can benefit from becoming acquainted with how to use savings accounts for specific purposes. If you have an online bank, it can be especially easy to open a digital bank account where your child can store their savings. Maya, for one, is a practical option as it does not require maintaining balance and offers higher interest rates than traditional banks. Using a digital bank to track their savings introduces your child to the banking system and helps them understand the concept of earning interest. A hands-on experience like this can demystify banking for your child and make them feel more grown-up and responsible.
Match Their Savings
To further encourage your child to save money, how about offering to match their savings up to a certain amount? For instance, for every peso they save, you can add another peso. Such a system not only doubles their savings but also showcases the value of compound growth. Explain to them how matching works and why it’s a great incentive. Knowing these terms and understanding that you’re willing to meet them halfway can significantly boost their motivation and make saving a more rewarding experience.
Teach Budgeting
Budgeting is a fundamental financial skill that everyone should learn, and it’s never too early to start. To begin, show your kids how to create a simple budget. Include their income sources (allowance, gifts, etc.) and their expenses (snacks, toys, etc.) in the equation. This exercise helps them understand where their money goes and how to allocate it wisely. Next, suggest that they allocate a portion of their income towards savings for their goals. This can also be a good opportunity to discuss the differences between fixed and discretionary expenses to help them prioritize their spending to achieve their savings goal.
Discuss Wants and Needs
In relation to the previous tip, helping your kids understand the difference between wants and needs is a crucial part of financial education. Explain to them that while it’s okay to spend money on things they want, it’s important to prioritize their needs first. Use real-life examples so that they can easily relate it to their savings. Discussing this topic helps children develop critical thinking skills and make informed decisions about how they use their money. Together, consider the long-term benefits of saving versus the short-term gratification of spending.
Use a Reward System
The use of a reward system for reaching savings milestones can encourage children to stick to their financial goals. It can be something as simple as extra screen time, a treat to their favorite restaurant, or adding a certain amount to their savings. For children, in particular, the use of positive reinforcement can be a powerful motivator. To make this reward system more effective, discuss with your child what kind of rewards they would find appealing and set specific milestones for them to achieve.
Lead by Example
Children often learn by observing their parents, so be a role model for your own kids when it comes to managing and saving money. Make an effort to share your own savings goals and strategies with your kids to help guide their behavior. For example, if you’re saving for a family vacation, involve them in the process. Show them how you budget, track expenses, and prioritize savings. When they see you being responsible with money, they are more likely to adopt similar habits.
Learning to manage and save money is a crucial skill that kids should start developing at an early age. By teaching them how to save their pocket money for their personal goals, you are instilling lifelong financial habits. These lessons in goal-setting, planning, budgeting, and prioritizing will serve them well into adulthood and help them become financially responsible and independent individuals.