One of the most important components of creating and sustaining a financial foundation is saving money. We've learned how to save money through trial and error. Kids aren't taught how to save money at school, among other things. This is clear from the fact that a sizable portion of adults have no money set up to pay for unexpected expenses. The repercussions are really serious.
Saving money is not something we frequently consider or teach our children, but doing so from a young age has a significant impact on how they will live. Kids don't always understand what we teach them, but they pick up on what is demonstrated in front of them.
1. A comparison of wants and needs
To teach your children the value of money, teach them the difference between wants and needs. Educate them about life necessities, like shelter, food, and clothes. Children may buy unnecessary things that are a waste of money because of their desires. When you take kids shopping, tell them they have plenty of toys already, so no need to buy a new one. They will be able to spend on things that they need in the first few years, because that is the primary practice.
2. Let's start with a piggy bank.
Piggy banks are the easiest and most approachable way to teach your kids about money and saving money. Make sure they fill their piggy bank with money they get and set goals. Spend their savings on their favorite toy once a month or two. By doing this, they'll learn how to organize their savings and how to use them. It's also a good idea to open a savings account or any other bank account. In addition, this will help them set financial goals in the future.
3. Make a savings plan
Saving money starts with setting goals. Making them understand the value of money and helping them set a plan will keep them motivated. Tell them why they need savings. Make them aware of the amount of money they should save from their allowance in order to achieve their goals efficiently. In this way, they'll save more money and feel motivated.
4. Keeping track of your spending is key.
Knowing where your money goes is key to saving. If you give your kids an allowance, make them keep track of their purchases and expenses every day. They'll learn a lot about their spending patterns by doing this activity. Encourage them to spend wisely and keep reminding them of the need to save.
5. Make sure you lead by example
By the time kids are seven, habits start forming. Their little eyes watch everything you do. Don't let them buy anything they want and set a healthy example by spending on the right things. Following what they're learning now, they'll explore ways to save money.
6. Buy only when you need it
Teenagers are attracted to impulse buying decisions. As soon as they see something, they want to buy it. They want things by their side, whether it's a dress or a game. Tell them to wait a little longer, or encourage them to spend their savings. They might avoid buying these things when they see how much they cost.
7. Term familiarization.
Kids start understanding money as they grow up. Make sure they know what those terms mean. In day-to-day life, we use terms like debits, credits, loans, and interest. Make sure your kids know what these terms mean. Before they start earning, teach them about taxes and accounting. This will make managing money easier for them. Financial literacy will only benefit kids.
Initiate the saving process from their early years by having regular conversations about money. It took us a long time to understand money and its value, but we can teach our kids these values from an early age. Using the financial discussions at home as teachable moments will make them responsible for their spending.