Saving is one of the most important lessons a parent can teach their child. This ensures that they develop a healthy attitude towards money and a more financially-secure adulthood. While it can be a bit tough to resist the urge of spending earlier on and delaying gratification, with the right approach, you can incorporate this crucial skill into your child’s life.
Though you can start the conversation about saving from the age of as early as three, it is likely they will not grasp the concept. Instead, as they grow older, by introducing activities such as saving in piggy banks, you can make sure that they start learning about it by the time they are six. By starting earlier, you create a microcosm of the real world for your kids. We earn salary and interest on our savings and investments. Therefore, this is just a controlled environment that prepares them for larger decisions in the future with bigger implications.
To encourage your kids to save, provide them a place to save. As they grow older, you can get them their own debit card. You can also pay them interest on their savings, so they get an incentive to save.
Tip #1: Wants vs Needs
This is one of the most important concepts you need to teach your kids to build a strong foundation of financial habits. Teaching kids to distinguish between needs, which are basics such as food, shelter, and education, and wants, which are all the extras and desires, can help them prioritize their expenses. You can also consider starting budgeting to help your kid plan their expenses and make the best use of money.
Tip #2: Having Income
To teach your kids to save, they need to familiarise themselves with saving and set aside a part of their income. When they are young, you can start with reward systems and give them small amounts of money in exchange for chores and then move on to pocket money. When they grow older, by encouraging them to get a part-time job, they can increase their income.
Tip #3: Setting Saving Goals + Tracking Spending
Asking your kid to put aside a part of their money aside for later can get them confused. Savings, after all, delays gratification. Therefore, setting saving goals that are attainable, can encourage and show them the importance of savings. For example, if they want a new toy, you can help them with budgeting and planning their allowance to buy it.
You have to teach them to track expenditures. These can come easier with apps that record transactions. Alternatively, you can suggest your kid to record their spending on a sheet of paper and analyze their spending patterns weekly.
Tip #4: Saving Incentives
When you set a grand saving goal – say a smartphone – you can also set a milestone for an extra bonus to keep them going. Asking them to save their small allowance can take a long time until they reach the required amount, so you can give them a fair bonus after they save a certain amount.
Tip #5: Learning From Mistakes
When they are earning and have money to manage, you are allowing them room to make mistakes that do not have a huge bearing. This helps in learning from smaller mistakes they can afford to make early on in life and in the future, avoid financial traps with bigger stakes and make smarter financial decisions.
Tip #6: Talk + Set a Good Example
Financial habits are built by observing parents, Therefore, do what you want your child to learn and set a good example. Many parents are reluctant to talk about money to their kids. However, by discussing the savings you have made, or about their budgeting, you can ensure that they grow comfortable with the idea.
Financial literacy is critical in our society, and the Milestone app helps parents instil those values in their children in a fun and unique way. Kids can complete quests and tasks to learn about budgeting, saving, and earning money. Parents can set up accounts for their children and assign chores that will help them learn about earning money. All of the features are designed to make financial literacy fun for kids.