A new report by Bristol University's Personal Finance Research Centre has found that regular saving improves life satisfaction, even if only a small amount is set aside each week or month. Knowing that saving can nurture well-being by lessening anxiety about money and debt, never has there been a better time to teach your kids how to flex their savings muscles.
Give them money to save
Louise Hill, CEO and co-founder of GoHenry says, “The simplest piece of advice to help kids learn to save is to give them some pocket money, however little, so that they can make their own decisions about it. This really is the start of their money management journey and will help them to budget, save and spend responsibly.
Remember, it’s better for them to make a £ 20 mistake at age seven than a £2,000 mistake at age 27. If you give your child some money and they spend it all tomorrow, they can't do something they wanted to do, and they’ll start to understand saving. It’s a harsh but valuable lesson.”
Make it interesting
To get kids excited about saving, explain the concept of earning interest.
Interest is a reward that savers receive, and they don’t have to do any work except to keep saving. Yet, our research* shows over half (58%) of Gen Z and Gen Alpha aren't aware that earning interest on savings is a form of passive income.
You can also discuss compound interest, in which money grows more quickly because you earn interest on your savings plus the previously earned interest.
The best way to understand how compound interest works is by taking a sum of money, such as £1000, with an annual interest rate of 10%
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By the end of the year, you will have earned £100 in interest, making your total £1100
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You would earn £110 in interest the following year (10% of the original capital and 10% of the year one interest).
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You would earn £121 in interest the year after (10% of the original amount of £1000 and 10% of year two interest), and so on.
Be age-specific with savings advice
Age 3-5
Kids this age often find it difficult to understand the future. Give examples of what you’re saving for, framing saving in terms of the goal rather than time.
You might say, “I’m saving money for a holiday” or “I’m saving to buy a gift.”
If you pay with cash, save the change. Tell kids, “We’ll save this for another day,” and let them put the money in a see-through jar or GoHenry savings pot so they can watch the savings grow.
Use repetition. Whenever you save, say, “Each time we save, the money grows,” or “We’re saving today so we can get something we want later.”
Age 6-11
Giving a regular allowance is key for young kids and will help them better understand the concept of saving their own money.
Suggest saving part of their allowance. You might say, “In this family, we save 20% of our money, so put £1 away each pocket money day.”
Set savings goals and praise them for saving regularly. When they’ve saved for and bought an item they want, talk about how long it took and how they feel about finally getting their hands on the item!
Age 12+
As your kids get older, foster independence. Give them decisions that require saving. For example, you might tell them they need to save a certain amount for a friend’s birthday, their holidays or a cinema trip.
Don’t lay blame – if they mess up, chat about it, but stay positive. Mistakes are part of the learning process!
Re-evaluate goals if they dip into their savings or fall short of a deadline. Remind them to keep up the habit and adjust their budget if needed.
5 ways to put saving into practice
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Help them understand how to delay gratification. Offer the choice of a small treat now or saving for a larger reward later – and follow through!
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Give positive reinforcement. Encourage your child or teen to add to their savings each time their favourite team scores or they achieve a personal goal.
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Event planning. If you have a family holiday or special occasion soon, ask your kids to save for a specific part – like souvenir money or money for a present.
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Set short and long-term goals. Help them develop a short-term goal to motivate them to save and a longer-term goal to understand how to wait for a bigger purchase.
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Visual reminders: Suggest they save a photo or post of what they want to buy when they’re tempted to spend.
