By Katherine O’Chee, money writer at Mozo.com.au
It’s no secret that as parents, we want the very best for our kids, and that includes preparing them for many of life’s challenges. While teaching them how to read, write and do their chores would sit high up on that to-do list, it’s just as necessary to prioritise lessons on how to earn, save and spend money wisely.
A recent report from Mozo on comfort spending revealed many Australians actually struggle to keep their splurging under check, spending a whopping $25.5 billion a year to relieve their stress or boredom. That’s why it’s important to get your kids into good money habits early on, so that they’re more than ready to manage their income, stick to their budget, and tackle whatever financial bumps they may face in the future.
Giving your kids weekly pocket money is a start – but it’s not enough, as far as fostering smart savings behaviour goes. Any child with five bucks in their pocket is probably itching to spend that money straight away, whether on canteen food or candy at the corner shop. When their friends are all buying little treats for themselves, it’s hard to resist the urge to do the same.
So it makes a big difference if you take the time to show them why saving up is worth all that effort. Here are five ways you can help your kids grow from little spenders to big savers:
Start a savings stash
Piggy banks are a great way for your kids to dive into the savings world and learn about the benefits of putting pocket money away instead of spending it. You could sneak a few dollars into their piggy bank every night, and have them count and jot down how much extra they’ve received just by parking their money there. While this method will cost you a little in the short run, it’ll teach your kids the valuable lesson that money can make money – just by saving up, you could earn a whole heap of interest!
Once their piggy bank is filled to the brim, you can ramp it up a notch by opening a high interest savings account for them. But a word to the wise here: watch out for accounts with enticing introductory offers that revert to much lower rates, or those that wipe off your child’s interest if they make a withdrawal.
Set savings goals
It’s time to show your kids a bit of tough love when they start nagging you about buying them the latest action figure or a new pencil case. Instead of saying ‘yes’ or getting it for them as a gift, why not turn their desired purchase into a savings goal that they can work towards?
To make it fun, you could use savings jars, with each one represent a savings goal. If your kids have more than one purchase in mind, then it means they’ll have multiple jars, and every week, they’ll be responsible for deciding how much pocket money goes into each jar. This exercise is a nice entry point into how to budget and prioritise your purchases or expenses.
For the more tech-savvy families, mobile money apps like Spriggy and RoosterMoney could be the way to go. These apps give kids the opportunity to budget and make hands-on financial decisions around how they want to allocate their pocket money – whether for spending or saving.
Reward your kids for successes
Why save for a rainy day when you could be jumping in puddles and enjoying the rainbow? Saving up can be tedious, so it’s all too easy for kids to run out of steam halfway through and give up before they’ve reached their savings goal.
Maintain your child’s savings motivation by rewarding them when they hit small milestones. For instance, every time your kid saves up $10, you could add an extra $2 to their piggy bank or savings account. There’s nothing like a few financial sweeteners along the way to keep their eyes on the prize!
Map it out
Chances are if you tell your kids something once, it’ll go in one ear and out the other. The trick is to make that message stick, and with money lessons, this could come in the form of tracking their savings.
Create a timeline that lets your kids visualise when they will reach their savings goal, with checkpoints at 25%, 50% and 75% of the goal. You can draw the timeline down on paper, with $0 on the bottom end and their target amount at the top end. As your child puts more and more money towards the goal, the two of you can continue to revisit the timeline and mark down the progress they’ve made. This is a great way to show your kids how saving up a step at a time can lead to huge rewards.
Talk about the money, money, money
A big part of nurturing your child’s savings skills is to have open and honest money conversations with them. Jump on opportunities to share valuable financial lessons with them, whether that’s chatting with them about their savings goals when you introduce pocket money, or going through money management basics like bank statements and interest when you set up their first savings accounts. While you’re at it, you could even get them involved in the family budget and have them give you a hand with making or reviewing it. The key is not just to open up those conversations, but to keep them alive.
Teaching your kids how to save money can be a tough job to take on, but with these tips under your belt, there’s no better time to start than now!
About the author:
Katherine O’Chee is a personal finance writer at financial comparison site mozo.com.au where she spends her days digging into banking fine print and sharing her latest money savings hacks with Australians to help them make better money decisions.