Teaching your children to save can be rewarding and tricky in equal measures. Trying to get them to understand the importance of money, and how it works can be tough – it’s difficult enough to understand this as an adult, let alone as a child! Mr Lender, a UK based short term loan provider, has put together a few handy hints and tips on how you can teach your child to save and manage their money.
Teach them to budget
Set up three jars for your children; one for savings, one for spending, and one for sharing. Teach your children to budget their money, by asking them to divide any money (i.e. allowance, birthday money, sweetie money from grandparents) into the jars.
The spending jar will be any money they are allowed to spend now on smaller purchases, such as a sweet or a small toy – this teaches your child that although they’re saving, they are still able to have a small amount to treat themselves with now. The sharing jar will be for money your child can give to someone who needs it, such as the homeless or a particular charity they’re interested in – this teaches your child to be compassionate with their money, while also teaching them that sometimes it pays to help others.
The final jar is the savings jar. Ask your child to set a realistic savings goal, such as a slightly more expensive toy, then explain to your child that they can have this special treat once they’ve managed to save up for it. You could even match whatever your child puts into their pot to help them reach their goal quicker.
Though it is vital to remember two points – the first is that their goal must be realistic. If their goal is slightly out of reach, they will only get bored and will eventually give up as they can’t see the point in saving. The other point to remember, is to let your child do the saving themselves – if you do choose to match what your child puts into their savings pot, match their amount but don’t put in any extra. If you put too much in, or simply buy them what they’ve been saving for before they reach their goal, they’re going to find it difficult to learn to save.
Give them a visual to work from
Children are often very visual learners, so teach them about saving in this way. Put a poster in a prominent place where your child can clearly see it, for example on the fridge, or in their bedroom. The poster should show them how much they have left to save before they reach their target, and how much they’ve saved so far.
Teach them about special deals
When you do your food shop, bring your child along and get them involved. Explain to them the choices you’re making, and talk to them about making choices between the cheaper options and the more premium brands. This will help your child make beneficial choices when they begin to do their own food shops. If your child is still quite young, they may not find this particularly interesting, nor will they really understand. However you can still get them involved. Give them a set amount, around £2-£3, and ask them to make a choice about a particular item such as fruit or vegetables. This will give your child experience in making choices when it comes to spending their own money.
Engage your child
Teach your child about spending money in real life situations by engaging them in made up scenarios. Pretend to be a shopkeeper and give your child money to spend in ‘the shop’. This will not only teach them the value of money, but also how to make informed decisions about how to spend it in real life situations. Playing Monopoly is also a great way to teach your child about how to spend their money.
Kids love to be challenged – so set them one. Challenge your child to save a set amount each month, and reward them when they reach their goal. This could be in the form of extra cash, a special toy, some clothes or a day trip out. This will teach them that they will be rewarded for saving, which will help them to see the benefits of having a savings account as they get older, where they will be rewarded in the form of added interest.
No today, yes tomorrow
If your child asks for something which you simply can’t afford at the moment, give them a ‘no today, yes tomorrow’ answer. Explain to them that you can’t give them what they’re asking for, and follow this up with a reason why – this could be that you’re saving for a family holiday for example. Sharing this information with your children will help them to understand that you’re not simply saying ‘no’ to be mean, but that you’re saving towards something which will benefit the family.
One great way to teach your children how to save and spend their money is to give them a set amount of pocket money each week. This will help them to understand how to manage their money, and save for the things they really want. You could even save yourself a bit of money by giving your child an allowance, as they are then less inclined to ask you to buy things for them.
Let them make mistakes
Letting your children make mistakes while they’re young, will hopefully help to prevent them making even bigger mistakes as they get older. If your child chooses to spend their money on a cheap toy which doesn’t last very long, let them do it – they will then soon learn about making wiser choices with their money, and saving to buy a better quality version. Teaching your child this at an early age will hopefully then help them to not make the same mistakes later on with much larger purchases such as a house or car.
Teach them about savings accounts
One of the most beneficial ways for your child to ultimately save is with a savings account. Teach your child the importance of using a savings account, and they will reap the benefits in the form of interest later on. There are plenty of savings accounts available for children – Lloyds have their YoungSaver account, while Nationwide have a Smart Account for children. You can also get a MySavings account from HSBC, a Young Saver Account from Halifax, or a Children’s Instant Saver from Barclays.
There are many different types of accounts available for children, all with their own added benefits. It is certainly worth looking around to see which account is the best suited for you and your child – whether this is by having the option to withdraw money at any time, or it could be the amount of interest added to the account. Some accounts also require a minimum amount to open them, ranging from £1-£10.