Best Ways to Save Money
Kids who are taught the value of saving money early will reap the rewards and hopefully become financially savvy adults.
Young children who get into good money habits effectively will have choices about how they spend their money and will most likely not get into the habit of spending everything they have or more (through credit card debt or other). The best thing we can do as parents is to explain how we save, why we save and to give examples of what saving has done for us. We can explain the car that we drive them to school in is from two years of saving, or the XBox that they enjoy took us two weeks of work to pay for.
So what are the best ways to get kids to save? Well, firstly, they need to be earning money. Once they receive money they need to decide what to do with it. It is up to us as parents to make it compelling to save. The way I like to do this is to set goals. I do this by asking my children what it is they want, such as a toy, guitar lessons, music download or a trip to the water park. Whatever it is, write it down, research its value and then show your child what it will take to earn enough to pay for this. Sometimes, rather than setting a monetary goal, the goal is the thing or experience they want and then I explain how many tasks are needed in order for them to achieve the goal. For example, say it is $100, I explain that if they mow the lawn 10 times at ten dollars each time, they will earn the allotted amount. This helps them associate effort and quantity with money earned.
As kids have more things to pay for like train tickets, food, mobile phone plans etc.., it is good to put a percentage away in savings from what they earn. I believe that a good goal to aim for when they are teenagers is at least 30% savings. To be an effective saver, put this savings in a bank account or piggy bank first, with the rest available as spending money. It is never a good idea to save at the end of the pay cycle as it is very easy to spend what you've intended to save. This is a good money habit that adults should often not forget.
How do you help your kids to be better savers? Involve them in the process. Show them the value of their savings as they put money towards a goal. If they have multiple goals, let them choose which goals they’d like to allocate their savings to. You can have different jars for different goals or different envelopes. Encourage them to reach their goals and when they do, congratulate them. Ask them how they want to spend the money that had been allocated to the goal, do they want to continue saving for the next goal or spend it on the thing they wanted? Showing how money accumulates in certain amounts over time is a fantastic skill to have, it helps your children understand delayed gratification – less now and more later. As they get older, this will help them save for a car, a house, a holiday or whatever they desire.