For most of us, spending is easier than saving. But, getting into the habit of saving from a young age can lead to a lifetime of financial independence.
With kids learning about money in elementary school, understanding how to save and spend is a lesson well learned.
So, what can you do to help your kids develop a healthy relationship with money - and understand the difference between instant and delayed gratification?
1. Make a habit of saving
It might sound obvious, but if your child is trying to save, they need to cut back on their spending. Children may struggle with saving all their allowance, but it can be helpful to get into the habit of putting a little aside each week. Getting used to saving at least some of their allowance is productive in several ways; it enables kids to develop a habit of saving, and it teaches discipline and delayed gratification.
Children learn about money and its value in school, from as young as five. Once they are old enough to understand the value of money, they are old enough to know how it is used. When they are younger, saving goals will probably be limited to saving for a new book or a small toy. Even these short-term saving habits will help build financial literacy.
As they grow older, your children might be saving over a longer term. Be it a couple of weeks or months; you are still instilling a sense of financial independence.
2. Set up saving goals
Encourage your children to set up saving goals. If they are saving for something in particular, for example, a games console, you can help them establish a savings plan. Work out how much money they have to start with, and then what they need to save to reach the total. Agree on a time scale, and encourage them to be realistic about their goal. Saving for something high value is not going to be achieved in weeks, it could take months before they reach the set total. Understanding that saving takes time can be a challenge, but it is a lesson well learned.
If possible, agree to match or support their savings, or add a little bit of interest as their money grows, to give them a boost towards their goal. Incentives can be very persuasive.
3. Visually track savings progress
Seeing is believing. Having a visual perception of savings progress inspires your kids to keep saving.
With GoHenry, your child can set up a savings goal within the app. Based on the amount of allowance your child receives and their end goal date, GoHenry will work out how much they need to save each week. This amount will then be automatically transferred from their spending account each week.
You could also make a chart and stick it on a bedroom wall or the fridge. Let them tick off and date each little chunk of money as it is put away. That way, if the saving slows down, they can see clearly when this happened. It might give them the push to start again.
4. Keep money safe in an app like GoHenry
More parents are opting to give children an allowance via apps such as GoHenry, rather than handing out cash that can easily go missing. If your child has a GoHenry prepaid debit card, you can set up a weekly allowance transfer to their account. Both you and your child can see exactly how much they have saved, right down to the last cent.
5. Earn allowance for doing chores
Not all children get an allowance, but quite a lot do. Some parents choose to reward children for doing chores around the house.
According to The GoHenry Youth Economy Report, the top chores completed by young earners in the US are (plus a guide to the going rate):
- Tidy room - $1.67
- Read every day - $1.36
- Make bed - $0.97
- Homework - $1.93
- Wash dishes - $1.76
- Load/empty the dishwasher - $1.23
- Feed pets - $1.21
- Vacuuming - $1.55
- Laundry - $1.48
- Garbage/recycling - $1.14
Remember, this is only a guide and it’s not how much you give that’s important, but the fact that you pay a regular allowance.
Tasks that your child can complete will also vary by age - older children could perhaps help with ironing or cooking, and younger children can lend a hand with vacuuming or dusting.
Some parents opt to give payment by chore, and others prefer paying a set amount in reward for the completion of a set of tasks.
Others create a list of jobs, some of which are done without reward and some which are rewarded with an allowance.
6. Spend less money
One of the best ways to save money is to spend less money on unnecessary things. Explain to your children that they don't need to buy the latest fashion trends or the newest gadgets to be happy. Encourage them to spend their money on experiences and things that will add value to their life, not things that will just sit in their room gathering dust. This will teach them the value of money, how to be a smart shopper and how to spend wisely.
7. Offer saving incentives
Sometimes it can be hard to get children motivated to save their money. If your child is struggling to save, offer them some savings incentives. For example, you could match every dollar they save or give them a small amount of interest on their savings. This will help them to see that saving can be beneficial and might encourage them to start saving more.
8. Leave some room for mistakes
It's important to allow children to make mistakes with their money. It's the best way for them to learn. If they overspend one week, don't bail them out. Let them work out how to cover the shortfall and live within their means. This will teach them an important lesson about spending and budgeting that they'll carry with them for life. It also means they can make mistakes in a safe and controlled environment, instead of mismanaging their money as an adult and falling into debt.
9. Talk about money often
Money is a taboo subject for many people, but it's important to talk about it with your children. Discussing money openly will help them to understand it better and make good financial decisions in the future. Explain to them how you budget and save money as a family. Help them to understand why it's important to be careful with money and how it can impact their lives. You can also use GoHenry's Money Missions to help them learn more about basic money concepts. Money is a complex subject, but by talking about it often and openly with your children, you can help them to develop a good understanding of it from a young age. This will stand them in good stead for their future financial wellbeing.
10. Be a good example
As a parent, you are your child's biggest role model. They will learn most about money from watching you and how you handle your finances. So, it's important to be a good example when it comes to managing money. Show them how to budget, save, and spend wisely. Let them see you making financial decisions and explain to them why you're doing it. This will help them to understand the importance of good financial management and give them the skills they need to manage their own money when they're older.
11. Needs vs wants
One of the most important things you can teach your children about money is the difference between needs and wants. Needs are things that we have to have, like food and shelter. Wants are things that we would like to have but don't necessarily need, like a new toy or video game. Help your children to understand that we can't always have everything we want and that it's important to be careful with money.
12. Set daily/weekly spend caps
If you're worried about your children overspending, set them a daily or weekly spend cap. This will help to limit their spending and prevent them from blowing all of their money at once. You could give them a certain amount of allowance each week and tell them that they can only spend it on certain things. Or you could set a limit on how much they can spend each day. This will help them to learn how to budget and manage their money wisely. With GoHenry, parents can set daily spending limits and track their children's spending in real-time, which will help to keep them on track.
13. Not giving in to peer pressure
One of the biggest money mistakes that children make is spending money to keep up with their friends. Peer pressure can be a powerful thing, but it's important to teach your children to resist it. Explain to them that they don't need to spend money to be popular or cool and that they should only spend money on things that they really want or need. This will help them to make better financial decisions in the future and resist peer pressure when it comes to spending money.
14. Keep track of what you spend with spending notifications
If your child has access to a prepaid debit card like GoHenry, you can keep track of what they spend using the app.
Allowance apps like GoHenry have become an increasingly popular way for parents to 'pay' children’s allowance. Children and parents can keep track of available funds and see where and when money is spent. Parents can also determine where money can be spent and stop the card from being used in certain places.
With GoHenry, you can see where children spend their money with instant notifications. Equally, children can see their savings grow. Keeping track of what has been earned, spent, and saved is an important habit, enabling children to learn how to keep on top of their money from a young age.
Saving is a great habit to get into, whether you stash your money in a piggy bank, wallet, or online money app. Familiarizing children with an understanding that we have to earn and save before we can spend is a valuable gift to give.