5 ways to teach your children about saving money
Just like any habit, saving money is a crucial one for long term financial success. Teaching your children about financial literacy and saving money from a young age, gives them a head start later on in life. It doesn’t just teach them to save up for something they want, but also to have a backup plan for a rainy day.
Managing finances isn’t something that is taught in school and many of us end up trying to figure it out as adults through trial and error. The first step is to actually explain to your kids about savings, budgeting, banks and financial goals. With that information, your children will grasp the concept of saving money from an early age and they will carry it with them their whole life.
After you’re done with the theoretical part, you’re ready to move on to the practical part and that’s why we’ve compiled five ways to teach your children about saving money:
- Wants vs. needs
You children need to understand the difference between wants and needs; wanting a car is not as important as needing food. Start with the basics, such as shelter, food and clothing and then explain that wants such as a fancy car are luxuries that make life a bit more enjoyable.
List them down and make your child interact by going around the house categorizing the wants from the needs. At the end of the day it should be a fun activity!
2. Start a piggy bank
Children are visual so the best way to start teaching them about money and saving is with a piggy bank, because it’ll allow them to physically see and touch the money. Create a reward system and let them earn small amounts of money, little by little they will see the money grow. Talk through this with them and make a big deal about it growing.
Set a date for them to eventually open the piggy bank and count the money they saved up. Your child will probably want to spend all the money in one place, that’s when you need to explain to always take a chunk and save it for the future.
3. Open a Savings Account
With the chunk of money left from the piggy bank, visit your bank and let your child open their own savings account. This takes money management to the next level, and will better prepare them for managing their finances, savings and budget when they’re older.
Explain to them what a savings account is, how banks offer interest rates and even show them how you can bank on your phone and keep track of the money in the account.
4. Help them earn more money
Now that your children understand the value of saving money, you can teach them the importance of earning it. So how about inspiring them by suggesting that they help with household chores? In exchange, you can pay them for their hard work.
You can make this more exciting and fun by creating a weekly chore chart, where you can specify who is doing what and at the end of the week you’ll reward accordingly. This will teach them about having an income and that you need to work to earn money.
5. Set short-term and long-term goals
It’s going to be really exciting to witness your child learn about saving money and become better at it over time. As your child grows older, help them set financial goals and ask what they’d like to save money for.
Allow them to think of the future, give them the responsibility to manage their money with guidance. Even if they make mistakes, explaining the opportunity cost will make it easier to understand the consequences of their actions and learn from their mistakes from a young age instead of making expensive ones as adults.
Open an IBNY savings account in minutes through Bank al Etihad’s mobile banking app.
