Sent: 01-12-2009 17:20:01
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How to Teach Your Kids About Saving
Saving money is one of the most important financial skills we can learn but unfortunately parents very often don't set a good example for their children. Yes, when we know a bonus or tax return is coming our way, we inevitably think about holidays, new cars or buying a whole new wardrobe, but if you've got massive credit card debt, you should be paying that off first. It may be boring but unless you get your priorities right you won't be able to fully enjoy indulging yourself in a beach holiday anyway.
Children think in exactly the same way when they are given a 'bonus' but they don't have your responsibilities so they won't understand why saving is necessary. Since the most frequent word out of most kids' mouths is "why?" this is an ideal opportunity for you to explain why saving is important. Frame it in tangible terms that they can understand ie. saving more money will get them an mp3 player instead of new shoes!
The best way to introduce the concept of saving with your children is to work with a defined goal. Suppose they come to you asking for a new pair of football boots. Rather than just saying no, explain to them that you have a budget and that certain priorities come first e.g. feeding the family! Then offer them a proposal - if they are willing to save some of their pocket money towards paying for the boots, you will match every dollar they save. If they are older, you can suggest that you will match them 50% - for every two dollars they save, you will give them a dollar.
This will give them an incentive to save some of their weekly allowance, while at the same time showing that you are keen to help them get things that they want. Although you have said "no" to the initial request, it is not a closed, definitive "no". It is an offer to work with them to reach a goal. This will give them an incentive to save money and to practice good financial habits. The more they save, the more you will help, so it is in their interest to take a responsible attitude, and they will respond to this as a challenge - and there's nothing that kids love more than a fun challenge with great rewards! It is beneficial to both of you, because they will have your help to get the thing they want, and you will be able to impart a lesson to them.
Of course, kids may not be very happy with the idea initially that you are not going to just go out and buy them the boots, but they will learn an important lesson about responsibility. To make sure that they don't feel that they're losing out by having to save so much of their allowance you can reward them with a treat. Take them on a trip that they didn't expect to reward them for being financially sensible so that they don't feel like they are missing out for the sake of learning a lesson. This will also minimise the chances of them raiding their savings in a rebellious spending spree.The Kids Money Qld website - www.qld.kidsmoney.com.au has some great resources to help with teaching your kids about money, including a series of books - Money Makes the World Go Around, written by Kids Money Founder Greg Smith.
This email is general in nature only and does not constitute or convey specific or professional advice. Legislation changes may occur quickly. Formal advice should be sought before acting in any of the areas discussed. Be aware that the information in these articles may become innaccurate with time. Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended and hence this publication is not "financial product advice" as defined in Section 766B of the above legislation. All expressions of opinion by contributors are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated. No responsibility for the accuracy of the opinions or information contained in the contributor's articles is accepted by any other person or entity. Copyright: This publication is copyright. If you wish to reproduce this article you require a license, which can be purchased here, to do so.