Teaching your children how to save money from an early age is one of the best things you can do for their future. Saving money isn’t always easy but getting into good money habits early on can help.
The question is, how can you teach kids to save? Here, we reveal 6 ways to teach your kids good money-saving habits.
How to teach your child to save money
- 1. Discuss wants vs needs
- 2. Open a savings account for them
- 3. Introduce pocket money
- 4. Motivate them to save
- 5. Let them choose a savings goal
- 6. Lead by example
- 7. Offer saving incentives
- 8. Leave room for mistakes
- 9. Help them make extra money
- 10. Talk about money
- 11. Teach them about savings with Money Missions
- 12. Track progress with GoHenry
What are savings?
Savings are money or income not spent and put into accounts to accumulate. Explaining this concept to kids is tricky, especially if they can't see money growing week by week. What will help is to explain savings with a real-world example.
For younger kids, show them what would happen if they saved two sweets daily in a jar for a week. The next step is to explain that they can also save their money in the same way. Ask them to put any spare change they have (or you have) in a pot daily. At the end of the week, show them how much they have 'saved'.
With older kids, transition to saving goals for something they want and show them how long it will take them to reach this by putting away half their pocket money each week. To motivate them, suggest they add birthday money or earn extra money to boost their savings and show them their progress each week.
Why is saving important?
Explain to kids and teens that saving money is essential for several reasons. For a start, having savings as an adult gives you peace of mind knowing that you have a financial cushion in case of an unexpected expense, such as a job loss or car repair.
Understanding how to save money and delay gratification can also help kids feel in control of their money to reach their financial goals. Lastly, knowing the importance of having savings can also give you more opportunities as an adult to take advantage of, such as starting a business or investing in a new venture.
When to start talking about saving habits
Ideally, children should be taught about money from an early age. By the age of six, children are typically ready to start receiving pocket money. At this age, they understand that they can exchange money for goods and that money has value. This allows you to introduce the concept of saving.
Stick to teaching the very basics when your child is young. By the time they are seven, they will have a much better understanding of the value of money and how it only goes so far. You can start showing them to save a portion of their pocket money for the things they want but can only afford once they have saved some money.
12 Tips to teach your child how to save money
There are many ways to teach your kids about money and money-saving habits that will stick with them throughout adulthood. Let's look at some of the best tips you can follow.
1. Discuss wants vs needs
One of the first lessons you can teach your children is to separate what they want from what they need. Explain how you need to prioritise what you need over what you want.
Remember, children learn how to behave by watching their parents. So, if you want them to start prioritising what they need over what they want, you will need to lead by example. For example, parents can model good money management by showing how they've saved for certain special purchases.
Also, it's a good idea to see if your kids understand what you are telling them. With younger children, quiz them on items found in the home, from kitchen utensils to clothing to toys, and ask them whether it's something the family needs or wants. With teens, get them to question what they are asking for. Do they really need a new phone, or is it that they want a new phone? By drawing this distinction, kids start to understand that some purchases should be a higher priority than others.
2. Open a savings account for them
Opening a savings account for your child is a great way to motivate them to save money. Make sure to discuss with them how savings work and the purpose of a savings account, and choose an account that allows them to see their progress online or via an app. A savings account works well when your child has a goal in mind. Perhaps they want to save for a new pair of trainers or the latest gaming console; if so, they need a savings account that allows them to make regular deposits and see their savings grow.
3. Introduce pocket money
Pocket money is one of the best ways to introduce children to money. They can use it to:
Buy the things they want and need
Learn how to budget
Begin to understand how to be financially independent
To save for items they want
When you give your children pocket money, talk to them about what it's for and encourage them to set aside a small amount to save towards something they want or need. For younger children, set small savings goals so they can get the reward more quickly. As they get older, you can set larger savings goals accordingly.
4. Motivate them to save
It can be challenging to save money at any age. There is always something to spend our money on, and being disciplined enough to save is hard work. However, creating a savings goal with your child can help kids find the motivation they need.
Start by coming up with a savings goal. What does your child want to save for, and when do they want to reach this goal? The timeline will determine how much money they must put away each week. For example, if they're going to save for LEGO which costs £20, and they get £5 pocket money a week, explain to them that if they save £2.50 a week, it will take eight weeks to reach their goal.
First, make sure your savings goals are small and easy to achieve to motivate your child. And ensure your kids can easily track their savings so they can see their money grow. This can be done in a glass jar or via GoHenry's app.
5. Let them choose a savings goal
If you want to keep your child motivated around savings, let them choose their savings goal. You may want them to save for the future, or a goal you feel is appropriate, but they need to feel there is a point to saving. Teens especially will be less likely to spend their money if they are saving for something they want.
6. Lead by example
Do you have good saving habits yourself? Leading by example is the best way to pass on good saving habits to your children. Showing your kids how you budget your income and outgoings each month can help them to understand just how important budgeting is to life. You can also let them see how you save for larger, more expensive items by discussing what you are saving for and why. Be sure to talk about the range of savings you have, short-term for more minor things like days out and special items, mid-term goals for holidays and a new car, and long-term goals for the future and pensions.
7. Offer savings incentives
Saving for a big item is challenging, so offering incentives may help. If your child has set a big savings goal, for example, a £400 laptop, you could offer to match what they have saved when they get to the halfway mark. Or offer £10 extra for every £50 they save.
8. Leave room for mistakes
It takes time and effort to teach your kids about savings, and along the way, they will make mistakes, maybe taking the money out early and using it for something else or not saving enough, or simply changing their mind about saving money. If so, talk to them. There may be a reason why they're not saving money anymore. Maybe they're under pressure to spend money with friends, or they have lost their motivation. Once you know why they're not saving, you can start to address the issue and help your child set new financial goals.
9. Help them make extra money
Reaching their savings goals faster is a guaranteed way to show your child the power of savings, so help them find ways to make extra money. This could be anything from getting a part-time job, starting a small business, or doing extra chores or tasks for cash.
10. Talk about money
Four million parents don’t talk about money matters with their children, according to a significant new piece of research from MoneyHelper. The study also shows that parents who are very confident managing money themselves are twice as likely to have money conversations with their children than those who aren't confident (58% vs 33%).
So, if you want kids to be money confident and earn about saving, you have to talk to them about money. Forget the one big chat; everyday conversations tend to work best. Use what's happening in your life to discuss money, for example, when you are out grocery shopping, when your kids ask for something new, or when something you are watching on TV sparks a discussion about wealth or earnings. Every little bit helps in making them money confident.
11. Teach them about savings with Money Missions
Kids can get ahead of learning how to save and why saving is worth it with GoHenry's in-app Money Missions. All missions are fun and interactive and include information on how to save money, make saving a habit, set savings goals and grow your savings faster.
12. Track progress with GoHenry
Another way to teach children good money-saving habits is to show them how to track their money. Tracking your spending and saving helps to develop financial literacy as it brings to life the lessons around budgeting, saving and delaying gratification.
For example, often we don’t think about what we are spending and if we don’t track our expenditure it’s easy to overspend and run out of money or fall into debt. Teaching your child to track their spending habits will help them to become more aware of how to manage their money.
GoHenry is a prepaid kids’ debit card that can help kids in several ways. Not only does it give kids the independence to use a debit card in the real world, but it also helps them learn about the value of money and how to make smart financial decisions. It teaches them about money management and the importance of tracking their spending, and also allows them to set savings goals.