Simple Tips To Teach Your Child How To Save Money?

We live in a world of instant gratification, hyper-consumerism and easy retail credit. It is easy to fall prey and get into a debt trap at a young age. 

Financial literacy is a distinct concern in the UAE and the world in general. "According to a recent study, only 38 per cent of adults in the UAE are financially literate." - Khaleej Times.

Lack of financial education at school and home is perhaps the most crucial reason why so many adults still are financially illiterate. 

Instead of waiting for things to happen independently, we parents should take charge, instill financial literacy and good money habits in our children. 

Studies show that people who learn to save early in life usually make smarter financial decisions later. National Teach Children to Save Day starts kids off in the right path to saving for their future.

Dana Hurst

Tomorrow is "Teach Children to Save Day". Start a financial literacy journey with your child(ren) from tomorrow to help them build a bright future and a money smart generation. 

Simple Tips To Teach Your Child How To Save Money

Help With Distinguishing Between Needs And Wants.

Last week my 9-year-old came to me and said, "Dad, I need an electric tooth-brush, and I need it badly."  

How many times have we heard our children say something similar? 

Kids today are bombarded with eye-catching advertisements throughout the Day on the internet and TV. They don't have the maturity to distinguish between what is necessary and a fad. As parents, it is our responsibility to help them distinguish between needs and wants. 

We can begin by explaining that needs are essential basics like Food, Clothing, Shelter, Transportation, Healthcare and Education. Everything else can be classified as a want and should only come after needs are met, and if the budget allows. 

Help them understand that wants come after needs in priority. 

Teach The Value of Money

Instead of just buying things children ask for, it is better if they receive a fixed allowance every week/month. Some parents give pocket money, and some parents pay an allowance for completing some basic chores at home.

It is up to you to decide how you want to pay the allowance, but it is better than just buying stuff they want. 

Helping your child(ren) make their buying decisions gives them a sense of responsibility, teaches them the value of money, and prioritising the available cash to the best use.

Introduce Budgets

What is Budgeting?

Budgeting is a spending plan that helps you determine in advance whether you will have enough for your Needs, Wants and Savings. It is quite a simple concept but can be challenging to put into practice, even for adults. Hence it is essential to teach our kids this habit early. 

You can start with helping your child classify the pocket money into the three categories viz Spend, Save and Give

Help your child decide a percentage for each category with at least 10% to give and 20% to save. 

The best way to do it is by giving them three glass jars with a lid labelled with Spend, Save and Give. The visual cue of money collecting in each jar helps them build delayed gratification. 

Allow them to handle the money and help them make intelligent choices with their save, spend and give budgets. 

Help Them Set Savings Goals. 

Help your child define a savings goal. Show them how they can use their savings to buy a game, toy or gadget they badly want. 

Once they have a goal fixed, they are more likely to stay motivated to save for that goal. You can also help them understand how long it will take to reach that goal, based on their savings rate. 

Involve Them In Shopping And Budgeting

You can help your child learn valuable money habits by involving them in your grocery shopping and budgeting activities.

When you visit a grocery store/hypermarket and allow them to take charge of the shopping, help them choose the best products offering value for money.

Your shopping trips can be quality family time, providing valuable life skills to your child.  

Offer Savings Incentives 

Bonuses and Incentives motivate us at work to perform better, don't they? Employees are known to contribute more towards their pension plan if the employer offers to match their contributions.

Similarly, your child's motivation will increase if you offer to match a certain percentage of savings achieved or provide a reward for a particular milestone achieved. 

Digital World - Digital Money Tools 

We live in a world where money transactions are more digital than actual cash. Here are some digital tools, which can help your child understand how money works in the real world;

• Bankaroo – A virtual bank on a smartphone for kids helping them learn about money, budgeting, setting goals and savings. It helps them track their savings and be accountable for their spending decisions. It is a family-friendly interface accessible via the web and mobile apps.

• PiggyBot – Another smartphone app for kids to track their allowance, spending and saving. It has separate accounts for saving, sharing and spending, allowing them to carry the virtual money for shopping with you.  
• Saving Spree – This app is for kids age seven and above. It teaches how to save, spend, donate and invest money.  
• iAllowance – Another great app that shows kids how to save and spend. Whether you want to set up a weekly allowance or pay out a special reward, this app will help you do that. 

Lead By Example

Children learn a lot from their parents, and they pick up both good and bad habits by observing their parents' actions. Practice before preaching to them the value of money, savings and delayed gratification. Your fundamental role as a parent is to lead by example—modelling the kind of behaviour you want your children to adopt.

Of course, becoming a role model often means taking a close, honest look at how you handle money in your life. 

This kind of self-examination can be uncomfortable at times, but it's necessary for your child's development. 

Summary And The Bottom Line 

The following is the summary of the simple tips to teach your child how to save money;

1. Help with distinguishing between Needs and Wants
2. Teach The Value of Money
3. Introduce Budgets
4. Help them Set Savings Goals. 
5. Offer Savings Incentives 
6. Involve them in shopping and budgeting
7. Digital World - Digital Money Tools 
8. Lead by Example

While Teach Children to Save Day is observed only once a year, the lessons learned throughout the year can lay a strong foundation for future generations. Start today and keep going...