Saving money is the ‘golden key’ when it comes to building wealth and creating a solid financial foundation, and if you instil prudent habits in your kids from an early age, you’ll be empowering them to make the right money decisions as they learn to navigate the challenges of teen and adult life.
Here are our 7 smart tips to get the saving ball rolling!
1. Talk to your kids about money. Look for everyday opportunities to open age-appropriate conversations about how important it is to spend money wisely and never waste it. Then use practical examples to illustrate good money-management skills. For example, you could invite older kids to help you draw up a shopping list on a limited budget. Ask them to visit your supermarket’s website and find the best prices for various items before you go to the mall – and don’t forget to congratulate them on the amount of money their research has saved you! Younger kids will enjoy comparing prices on the shop floor, or collecting and cutting out coupons from the newspapers. Another good learning activity for small children is to play ‘shop’ at home, using toy money and groceries from your cupboard.
2. Explain the difference between needs and wants. It’s essential for kids to understand that something they desperately desire, such as an expensive toy or a new computer game, is a want and not a need, and that it can’t take priority over more important requirements like food, clothing and education. Grab a pen and a piece of paper, sit down with them, and together draw up a list of life’s wants and needs so they clearly understand the difference.
3. Stand fast in the face of demands! Don’t be tempted to give in to persistent nagging and buy that toy or treat you know you can’t afford – children need to learn that if they really want something, they must save patiently so they can buy it themselves. Learning about delayed gratification – the ability to resist the temptation for an immediate reward and wait for a later reward – is a vital life skill. In the famous Stanford Marshmallow Experiment, researchers found that kids who were able to wait longer for promised rewards had better outcomes – including academic results – in later years.
4. Pocket money and a piggy bank. You can’t expect your children to learn about saving if they have no access to their own money. Start an age-appropriate pocket-money system as soon as the kids are able to count, and give them each a piggy bank. A great idea for slightly older children is to show them how to split their money between three labelled jars or tins: one for spending, one for saving, and one for donations to charity. Offer small cash rewards for doing extra work around the house (over and above their normal household chores) such as washing the car or weeding the garden. A bonus of pocket money is that you can dock it for bad behaviour – this is a good way to teach children that actions have consequences.
5. Set saving goals for your kids. You can make saving fun by helping your children set goals. For example, create a wall chart with a colourful graph showing how their savings have increased over the months. Provide small rewards (such as stars and stickers, or staying up an hour past bedtime) when a child makes a concerted effort to save. If your little one is saving towards buying a special toy – and if you can afford it – offer to match her savings rand for rand with money from your own pocket. And if you have a little entrepreneur on your hands, motivate her to start her own mini business baking cookies, making toys or providing a useful service of some sort to friends and family!
6. Open bank accounts. As soon as your kids are old enough, take them along to the bank and help them open savings accounts. This will give them a sense of responsibility and ownership about their money, especially if you encourage them to resist dipping into their savings on impulse. To older kids, explain how their untouched savings will increase over the years and decades by earning interest – they may be amazed to know about the extraordinary power of compound interest. A theoretical but absolutely factual example: if you were able to double one cent every day for a month, the value of your savings would be worth an incredible R5 million by Day 30.
7. Lead by example. Be a good role model when it comes to managing money in your own life. Show your kids what an effort you make to save money, whether this means tucking away a few rands every month to spend on future birthday or Christmas presents, or giving them real-world examples of how to cut household costs by saving electricity and water, visiting annual sales to look for bargains, or reducing food waste in your kitchen.
What’s your family’s pocket-money policy? Tell us on Facebook, or leave a comment below.