Saving money is the key to securing your financial future. Yet most of us learned the importance of saving for the future through trial and error, and more importantly, experience.
Schools don’t teach children how to save money, so once we’ve become adults, we realize that we need to keep a portion of our salary for a “rainy day.”
Fortunately, there are plenty of ways to empower the next generation, and this starts with teaching our children the importance of saving money from a young age.
Here’s how you can teach your kids about saving for a rainy day:
Start with a Piggy Bank
Piggy banks (or other cute coin banks) are a great way to teach your kids about setting a portion of their allowance aside, while giving them an easy way to do it. Tell the young ones that your goal is to fill up the piggy bank with coins and peso bills until they are “full.”
Use the piggy bank to show them that if they save more, their money will grow.
Open Up a Bank Account
Once their coin bank is full, take your kids to the bank to open up a savings account for them. Have them count their money before they deposit it, so they’ll have a better understanding of how much money they have. Show them the final amount and reinforce the idea of interest.
Discuss Wants vs. Needs
The next step to teaching kinds about saving is to help them distinguish the difference between wants and needs. Explain that needs include the basics: food, clothing, and shelter. Wants are the extras (e.g., toys, board games, and more). You can use your own budget to illustrate how needs should be a priority and wants should take a back seat in terms of spending.
Reward Them with Fake Money
It’s not as a cruel as it sounds. Think of it this way: fake money (e.g., Monopoly money) is a fun way to teach children about the value of money without entrusting them with real cash (until they’re ready). Fake money acts as training wheels for future consumers, with you (the parent) playing the dual role of merchant and banker.
Help your children appreciate the value of money more by setting reasonable values for different chores (cleaning up plates after a meal), items (snacks), and perks (stretching bed time).
Refrain from Practicing “Open Wallet” Policies
Refrain from giving your children an open line of credit. Instead, set limits on spending, even if you can afford what they want.
You might have perfected the art of telling your kids “no” on other requests. Putting your foot down on things that they want is no different. Convey this limit early on in your children’s education to finances.
The longer you wait, the more difficult it will be for kids to develop new habits.
Leave Room for Mistakes
Part of giving your kids control over their own money is allowing them to make mistakes so they can learn from them. It’s tempting to step in and protect them from costly errors, but it may be better to use these mistakes as teachable moments. That way, they’ll be wiser with what they do with their cash in the future.
Prepare your kids for the future by teaching them how to save. Investing in financial training today will benefit them tomorrow.