Saving money is a habit that takes time to build – some adults have yet to master it! That’s why teaching your children to manage their money from an early age is the best lesson you can give them. You will be preparing them for the future. Most kids, like the rest of us, would rather spend their money on treats than save it for a rainy day. You need to encourage them by explaining and demonstrating the benefits of saving in ways that directly affect them. Here are 9 ways to teach your children about money:

1. Discuss wants versus needs

To understand the point of saving, children need to be able to see the difference between wants and needs. You can explain this concept when they’re old enough to understand that we can’t live without food, air, shelter, clothing, education and healthcare, and how that makes those items different from purchases we enjoy, but that are not essential for survival.

The parental explanation for turning down a child’s ‘wants’ 50 years ago was, ‘It won’t kill you!’, and that is still the basic lesson – but it helps to dress it up in more empathetic language.

You can use your own budget as an example to illustrate to your kids how you determine needs, and mark those ‘essential spending’. From what is left over, you then decide which of the ‘wants’ take priority. 

2. Start with a savings jar

A savings jar – the type with a coin slot and a plug at the bottom, usually fashioned like a cheerful storybook character – makes putting money away regularly a fun, easy task for kids. You can use it to get them into the habit of putting away savings before they decide how to spend the rest of their money.

But you need to show them that the savings jar grows their money for the future – and that the more they save, the more their money will grow. So, you need to teach them about interest. You can offer to match their savings to illustrate how interest increases their savings.

The best way to teach your kids about saving money is to save money yourself

You could start off matching their deposits by 100% when they are little, and decrease that amount in stages as they grow older. Once they take money out to spend it, it’s gone – so it can’t grow for them anymore.

3. Teach them to set goals

When children have their hearts set on something relatively expensive – an outfit, a toy or game, a pop concert – tell them they’ll only get it by saving for it. That way, they have an achievable goal to work towards. It helps to get them to write down the goal, rather than merely talk about it. The goal becomes more tangible when it’s written down and recorded.

Even if they don’t have special purchases in mind, you can encourage them to set savings goals every month. Allowing your children to earn and save money gives them the chance to learn how to manage it. When you offer allowances in exchange for chores, they’re also learning the value of work.

4. Open a savings account

Once the savings jar is full, take your child to the bank to open a savings account. You need an account that accepts a low minimum deposit and is child-friendly, like MiGoals4Kids.

Once your child has an account of their own like MiGoals4Kids, they will also be able to access digital banking, and start learning how to manage their money 24/7 from a smartphone. In this respect, youngsters might be better prepared for the future than their parents. What’s even better is that your child can earn 2,25% interest on all positive balances with the MiGoals4Kids account.

MiGoals4Kids accountholders also have access to up to 10 MyPocket savings pockets, so that they can dedicate different pockets to different goals and save for them all at the same time. They will also earn a competitive interest rate on their savings with immediate access to their money.

5. Use positive reinforcement

Praise your child whenever they save, regardless of the amount. Using positive words and phrases such as ‘Good job!’ or ‘Well done on saving every rand you can’ builds self-esteem, inspires confidence and encourages them to keep saving.

6. Let your kids learn from their mistakes

You can try to steer your kids away from costly mistakes with good advice, but sometimes they have to be allowed to make their own mistakes. They’re more likely to learn from the experience – they don’t have to agree with your opinions, but they must take responsibility for their own decisions. In the future, they’ll know what not to do with their cash.

7. Lead by example

The best way to teach your kids about saving money is to save money yourself. Have your own savings jar and put money in it regularly.

When you’re out shopping, show them how to check prices and explain why buying one item makes more sense than another. Explain that every time you get paid, you save a portion of your salary to help prepare for the future.

8. Keep the conversation going

Keep talking about money and the importance of saving. Discuss the difference between needs and wants, and always be open to talking about money and new ways to save. Ask them what they want to save for, and what they want their future to be like.

Encourage them to track their spending weekly so they can see how they are spending, and how much faster they can reach their savings goal if they were to change their spending patterns.

9. Share inspirational stories

Stories about money can inspire. Share your life journey of saving with your children – how you saved to pay for your studies, or to buy your first car, or your house – so they can see that saving is possible from someone they know well. You can also read books together that specifically highlight what happens when people stick to a savings goal (or don’t). 

Using these 9 tips, you can make your child’s understanding of money fun and accessible. It’s an investment in knowledge that truly pays the best interest.