Basic money habits are important for everyone and when it comes to saving it is fundamental. You should teach your kids good saving and spending habits as early as possible at the age of 7. Remind your children of the famous quote of Warren Buffet “Do not save what is left after spending; instead, spend what is left after saving.” Explore here 10 effective ways to implant the habit of saving in your child.
Why is it necessary to teach children to save money
If you can develop good habits in your children it will be beneficial for them and helps them become responsible adults. Besides, the habit of good saving helps the child understand the value of money rather than being overly prudent or economical. It is necessary to teach them about delayed gratification when it comes to money. This can help them guard against unnecessary spending and learn to value establishing control of their money.
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Ways to develop habit of saving in your child
Check below the 10 steps to get your kids on the saving pattern.
Responsible Spending
Firstly, you need to teach your children the value of saving. Make sure you help them to differentiate between wants and needs. Needs comprise the basics- food, shelter, basic clothing, healthcare, and education. On the contrary, wants are all the extra things such cinema tickets, candy, bicycle or the latest smartphone. So, do not buy your child everything that they ask for at any time.
When they ask for an expensive toy or game, make them understand that it is not fundamental for them. Explain to them to save this money to buy anything fundamental. Then they will be able to truly value the effort which goes into saving and earning. You can also hang a picture of the toy or game that they want to buy next to their money box or saving jar so that they stay focused on their goal.
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Provide a Place to Save
You can buy a money box or a savings jar for children so that they can save their spare change and of course, it will be an excellent idea. If children get this chance they will be less wasteful and realize that any amount of money saved is always good for the future.
Besides, it would be better if you make them understand the concept of disciplined savings by not letting them open the box till it is completely full and there is no room left.
Moreover, when your children become older, you can set up their own savings account at a bank or even get a kid-friendly debit card. If they have their own savings account, they will be more encouraged to save money.
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Set Savings Goals
If you tell your kids to save, it may seem pointless to them. So, it must be a better way if you help children define a savings goal. Saving goals will inspire them and they will be motivated.
When they know what it is they want to save for, allow them to break down their goals into achievable bites. For instance, if they want to buy an item of about TK.100 and they get a TK.10 allowance each day, help them figure out how long it will take to reach that goal, based on their savings rate.
Give incentives to encourage Savings
The interesting thing you can do to encourage your children to save is you can set incentives for your child. To do so you can fix a small amount of money which you add to their savings every time they save a specific amount.
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For example, for every TK.500, your child adds another TK.200 to their savings. This will undoubtedly make them want to save more as they would want to reap more rewards.
Explain to them how to invest
Let your children understand what investing money means. To do that look for child-friendly investment schemes which are comparatively safer than other plans and encourage disciplined savings. Now, these schemes are available. You can choose anyone suitable for you and your child.
Allow them to earn their own money
A survey by the American Institute of Certified Public Accountants (AICPA) shows that ⅔ of parents said that they paid their children an allowance with kids earning $5 per day, based on two hours of chores.
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In this way, you can make your children savers by allowing them to earn and save money. Thus, you can provide them with the opportunity to learn how to use it. With your allowances in exchange for chores, they are also learning the value of their hard work.
Track Spending
A better save is always to try to know where his money is going. You can track expenditures easily with a bank or debit card app. Besides, you can do it the old-fashioned way- maintaining a notebook.
Help your children write down their purchases each day and tell them to sum up at the end of the week. From this, they will get an eye-opening experience. Inspire them to think about their spending. Teach them how much faster they could reach their savings goal if they could change their spending patterns.
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Leave Room for Mistakes
Let your kids control their own money. Allow them to learn from their errors. It will help them to step in and guide them away from a potentially costly mistake. But make sure that mistake is a teachable moment. Teach them in such a way so that they will know what not to do with their cash in the future.
Be a role model
Your children always follow you so you should lead by example. To do so, you can set up a saving jar in the house in which you save money. They will learn the importance of savings and do it themselves.
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Money Talks
Make sure you talk about money with children if you want kids to learn about saving. Make a schedule and talk with the child about money.