Want to set your children up for financial success? Start teaching them basic money lessons early on to help them develop good practices to last them into adulthood.
As parents, you can set your kids up for success in many ways, one of them is teaching them good money habits.
Schools are beginning to bring financial literacy into their curriculums, however the basic and most important lessons often start at home. Sometimes, this can involve children observing their family’s behaviour; other times, it involves more active engagement. Here are a few ways you can help give your kids a head start.
1. Establish a rewards scheme
One of the most fundamental financial lessons is that money needs to be earned. While we realise as adults there are caveats to that rule, it’s an important place to start with children. Once they realise they cannot get things they want for free, it encourages them to be more mindful of the money they have and might encourage them to start to look at ways they can earn money to save up.
A good way to put this lesson into place is to consider rewarding kids for their positive behaviours. An example is to set chores for the kids that they earn money for doing such as cleaning their room, taking the bins out or helping out in the kitchen. Keeping rewards small might encourage them to save their earnings in order to get themselves something bigger and more meaningful.
2. Incentivise putting money away
As a kid it can be hard for them to see the benefits of saving their money and not spending it as soon as they get it. To make saving their money a more appealing notion, you could offer them reward or bonus money once they have saved a certain amount. For example, when they reach $10 saved, you offer an extra $5 for their efforts. It tells them more could be gained from storing money than buying something immediately. It’s also an early introduction to compounding interest.
3. Let them help at the counter or checkout
To understand saving money, kids may need to become familiar with the money exchange involved in purchasing something. This can help to teach them that the things we want aren’t free and need to be bought with money. A good way to do this is to let your kids pay at the checkout at shops with cash and receive the change. It may be even more impactful of a lesson if it’s something they want to buy, like a favourite food item or a toy, and they are using money they earnt.
4. Set up a bank account
Several banks offer accounts for young children to help them kick-start their savings habits. At Horizon Bank, we have a few different youth accounts to choose from. Setting one up could be a fun experience for the kids and encourage them to save by wanting to go to the bank to put money into their own account. It could also help the little ones see that money can grow over time with regular investment. They’ll likely earn some interest as time passes, which may help teach them about the power of longer-term saving.
5. Introduce goals
We all know it can be hard to feel motivated to save money if there is no goal or target, you’re aiming for. Think about sitting down with the kids and asking them what it is that they want to buy, then helping them work out what’s needed to achieve that goal. You may need to discuss the goal they set to ensure it is reasonable and achievable for them, so they aren’t discouraged if they are unable to achieve it. It’s likely that you will need to be checking in with them to ask how they are going working towards their goal, what they need to still achieve and encouraging them to keep going so they stay motivated and don’t lose sight or interest in their goal.
Teaching kids about money and savings is not a one-time discussion but a continuous journey filled with practical lessons and experiences. Building wealth for kids starts by instilling healthy money habits early. Children can understand the value of saving and smart spending decisions with the right guidance and tools.
Encouraging savings and setting a savings goal for kids will help them grasp the concept of financial planning and delayed gratification. Incentivising saving and making it a fun, rewarding activity can reinforce these concepts. Letting them participate in real-life transactions can also enhance their understanding of money's worth and the importance of budgeting.
The journey to financial literacy is a gradual process, and the team at Horizon Bank is here to help! With a range of youth accounts, we can provide the tools you need to help your child build healthy savings habits. Remember, it's never too early (or too late) to teach your children about money. The seeds you sow today will reap benefits as your children become financially responsible adults. Get in touch with us today.
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