Whether it’s going on the perfect vacation, finally buying that new car you’ve had your eye on for months, or being able to comfortably retire, many of the best things in life come from knowing how to save. Unfortunately, saving doesn’t necessarily come naturally to all of us – especially not children or young adults who haven’t quite developed their impulse control skills yet. Here are some tips to help you teach your kids how to save:
Set Up a Savings Account
Don’t wait until your child is a pre-teen or teenager to set up a bank account for them. As soon as they’re old enough to understand the concept of money, open up a savings account for them and make sure to take them with you. The key here is to make sure your child gets to see for themselves exactly what happens when they deposit money. In addition to being able to give them a hands-on lesson, you’ll help ensure your child is comfortable with (rather than intimidated by) banking.
Divide Their Allowance
The best way to help your child see the benefits of saving firsthand is to make sure they’re involved in the process. Rather than giving them all of their allowance in one go, allow them to choose how much of it they want to put aside to save. Whether it’s 50% or 10%, ensure your child knows that they’re the one in control of how money they get to spend and how much goes into their savings account.
As tempting as it may be to give them frequent updates on their savings, wait a while before revealing exactly how much money they’ve accumulated. Whether that’s three months, six months, or a year is up to you, but the ultimate goal is to make sure that the importance of saving feels tangible to your child.
Let’s say your child gets $20 a month and decides to save 50% of it. In 6 months, your child will have $60.00 saved. In a year? $120.00. It might not seem like a lot of money to an adult, but for the average 10-year-old? That’s like winning the lottery.
Provide Educational Resources
While there are hundreds of books about saving and money management written expressly for children, it’s important to recognize that children are unique and have different preferred methods of learning and absorbing information. That’s why it’s important to explore the vast array of resources available to you and your kids that are online in addition to being in print. From interactive web pages to YouTube, take the time to find the website, book, or video that resonates the most with your child.
Don’t Be Afraid to say No
As tempting as it is to just cave into every temper tantrum, the long-term damage that’s created by giving into your child’s every demand can be difficult to overcome as they grow up.
One of the most important things you can do when trying to teach your children how to save is to make sure they understand the value of money. If they’re used to getting everything they want when they ask for it, they’ll start to assume that money is an infinite resource available whenever they require it. This can result in a number of unpleasant surprises as your children grow up and realize that the money they need for things like rent, tuition, food, transportation, and concert tickets won’t just magically materialize out of thin air.
Use Positive Reinforcement
When your child takes initiative by deciding to put more of their money into their savings each month, congratulate them on making a smart financial decision. When they decide not to make an expensive impulsive purchase and instead hold onto their hard-earned cash, reward them with a compliment. By making your children associate your praise and positivity with their smart financial decision-making, you’re encouraging them to break the habit of spending money frivolously and to instead think of the big picture.
In a world in which financial stability grows more and more elusive and 32% of Canadians are nearing retirement without any savings, it’s more important than ever to ensure the next generation understands the value of putting money aside for the future.