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How to teach your kids to save money

Teaching kids how to save money

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Kinds, they say, are your future, and anything you teach them affects what shape your future takes. Since money can be a big part of yours and their future, you need to teach your kinds how to save money from an early stage. Saving money doesn’t mean not spending money on essential stuff like food, shelter, clothing, education, medication and fun. It just means not spending money when you don’t need to.

When it comes to saving money it’s never too early. We live in financially unstable times and in fact, all times are unstable if you’re not careful about spending your money. Even millionaires go broke when they don’t know how to save their money. So as soon as your kids learn the concept of counting, tell them about money and how to save it.

Tell them it takes money to get new toys, games and foods

There are many parents who want to keep their small children away from the dirty words of money, which is a mistake. There are many kinds who believe food comes out of the refrigerator and mom and dad bring the toys. Take them along when you go out shopping and pay in front of them. It’s not that they’ll immediately understand what’s going on, but at least they’ll be exposed to the concept of having to pay for things.

Explain them why you need to work and earn money

Almost every kid knows that mom or dad, or both, have to go to office or to work. Tell them why you do it everyday. Tell them when you work you get paid and then you can use this money to buy different things like food, milk, electricity, gas and toys. Tell them when they grow they too will have to earn money.

Encourage them to save

They don’t have to do it all the time but for some toys or games you encourage your kids to save money and then buy them. You can help them by giving one unit yourself for every unit saved by them. This will also act as an incentive. For instance, if a toy costs $10 you can tell your kid to save $5 and then you can add $5 from your side and let him buy the toy. Gradually as the child grows you can reduce the percentage of contributions from your side.

Involve them in financial planning

As your kids enter their teens you can involve them in your household financial planning. Every month you sit down and allocate funds to different monthly expenses like mortgage, medical, school fee, food and nutrition, entertainment, pets, etc. Seek their advice. Ask them what is important and what is not. Let them write down list of things you need every month and how much you can spend on them. If your kid thinks that buying an expensive video game is important than buying milk, don’t oppose him immediately. Figure out a way you can buy both milk and the video game by prudent financial planning or by saving money from his weekly allowance.

Help them differentiate between needs and wants

Food is a need, candy is a want. Similarly, school fee is a need, a video game is a want. Help your kids differentiate between them. Be careful though: something that you feel is a want may be a need for them. Instead of rejecting their opinion outright, let them save for wants while you provide for the needs.

Help your kinds track their savings

Create a new spreadsheet in Excel or in GoogleDocs and encourage them to enter whatever they’re saving. It’s very exciting to see the amount of money saved increasing with every new addition.

Encourage them to open a savings account

All kids like doing things the grown ups do, including banking. Take your kids to the local bank and help them open savings account. Many banks offer special categories for kids. They’ll not only be more inclined to save money there, it’ll also be a bit difficult to retrieve money casually.

Let them make their own decisions

At a smaller scale it’s not dangerous to let your kids decide how much they want to spend and how much they want to save. Just let them face the results. If your kid needs to save $20 to buy her favorite doll she can either do it in a month, or in two months — it all depends on how much she is eager to save.

Explain to them the concept of credit cards

You should avoid using credit cards in front of your kids, but if you have to, explain to them how it works. It’s not magic money. Tell them that you have to pay extra for using a credit card. Tell them what credit actually is and tell them they should avoid it as much as possible.

Convey to them not everything costs money

Your love and care for them doesn’t cost money. There are some things like love, friendship, character, values and traditions cannot be bought with money.