Saving money is one of the most important aspects for adults for having financial security. But do you think this habit can be learned in a day or two? It is an element that needs to be picked up in childhood and rooted in to ensue willingly. We need to empower our kids by teaching them the importance of saving. But how can we achieve that??
Here are 5 easy yet effective five ways to teach your kids the importance of saving.
Help children to set goals through a Piggy Bank or Saving Jars
Using a Piggy Bank is a great way to teach your kids the importance of saving. The goal should be to fill it up until there is no room left. I gifted my daughter her first piggy bank when she was less than 2 years old. She didn’t understand the value of it then but knew that whenever she found notes and coins, they had to go into the piggy bank. The money was collected for a full year until Children’s day and then we bought gifts for her from the savings. Starting with these basics, Eira understood that savings are important. Your kid is asking for a specific toy that’s of a higher price, you can help them set goals to make sure to save first and then get the toy. Having multiple jars with pictures of their goals or a gift they want to give their siblings or best friend, will get them excited and keep them on their toes to reach the goal. A saving jar labelled “donation” can imbibe values of contribution towards the needy.
In 2018, when Kerala was in need of relief funds due to floods, I’d explained to Eira that there is a need for donation and that our entire country had risen for the cause. That was a lesson as well as a motivation for her and she also donated a part of her savings through an organization.
Provide monthly allowance
Once your kids realize that the allowance they receive from you is a fixed amount, the thought of having an extra income will certainly excite them. Once in a while, allow them to do extra chores and provide an incentive. This will motivate them to be more proactive in helping out at home and even lend a hand to relatives and neighbors.
Exercise caution with the frequency of offerings and which activities are rewarded. You certainly do not want them thinking that they will get paid every time they help out in the house. A proper reward system will motivate a hard work ethic.
Teach them budgeting
Get your kids involved when you are creating your monthly budget. Explain to them the difference between what is necessary and what isn’t. This will help them develop smart spending habits. Tell them about, how you set your monthly budgets and keep aside savings to run the household. Instead of numbers, you can talk in percentages, if you are not very comfortable sharing the information.
Lead by example
A study by the University of Cambridge found that money habits in children are formed by the time they’re 7 years old. Those little eyes are always around us watching and learning. We parents are their first role models and what we do directly has an impact on them. Kids at a young age might not understand how a bank works. Most of the kids think that a bank is a place where everyone gets as much money as they need. So make sure that you’re saving first. Having a piggy bank placed right next to theirs with one of your goals will make things perceivable for them. Maybe a family holiday that you’re planning for or a gift that you want to buy for yourself or a family member. The more the situation is transparent the more they absorb and learn.
Avoid impulse buying
“Mom, can I get this toy?” , “Dad, can I get this dress?”. Do not fall for those words especially when it comes to teens. Make sure they know that things cannot be bought in a whiff. Planning your budget, making sure to know how much can be spent in that particular week/month is properly planned. There might be friends who get all the stuff that they demand for right when they ask for it, but you need to make sure your kid understands that contentment starts from the heart. A little can go a long way. The best way to make sure they learn budgeting is to include them in the grocery planning and shopping with you. Moms very well know how much planning goes into keeping their pantry filled within the budget to keep saving yet bringing delicious meals to the table.
Learning responsibility about handling savings
After a certain age, you can guide your kid to open a savings account in a bank. This is a great way to learn how to operate a bank account as well. Don’t forget to pitch in a portion into their savings when they start a bank account for their motivation. This step will take money management to the next level. But thats not all. Educating kids about finance management is a process and L&T Mutual Fund can help you in just that in the best way possible.
A Systematic Investment Plan (SIP) can be one of the best possible options for it. A SIP investment can help you save from as little as Rs.500 each month, and it can help you to accumulate a sizable amount over time to reach your goals. A perfect way to invest your child’s savings and explain them how their savings are growing over time.
The SIP Calculator can be used to see the monthly SIP amount they’d need to invest in order to achieve a particular goal in a particular time period.
Every child is different but as parents, you have to guide them and help them start their financial journey so they can become adults who manage their finances well. With time, assistance and support your child will learn the skill of savings at a younger age which will ripple impeccably into their adult life.
Disclaimer: This is for general information only and does not regard to the particular needs of any specific person who may receive this information. L&T Investment Management Limited, the asset management company of L&T Mutual Fund or any of its associates; does not guarantee/indicate any returns/and shall not be held liable for any loss, expenses, charges incurred by the recipient. The recipient should consult their legal, tax, and financial advisors before investing. The recipient of this information should understand that statements made herein regarding future prospects may not be realised or achieved.
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