What is a Good Age to Start Encouraging Kids to Save Money?
“A good start brings out half the success”- As the statement implies, the beginning must always be correct. The earlier you begin educating your kids about money, the better the results you can achieve. As a parent, if you want your child to be financially secure in the future, the useful thing you can do for them is to start educating them about money while they are young.
As per the data,
- 54% of parents think the knowledge of their teenager in money management is either “good” or “excellent”.
- 78% of parents think the money management of their children is poor.
- Only 26% of children aged 13-21 said that their parents teach them about money management.
Also, as per the Consumer Financial Protection Bureau, children are “developmentally capable” of saving at age 5, and the money habit can be formed from the age of 7. So, as parents, encouraging your child to save money from an earlier age is one wise decision. There is no doubt that saving money is a habit that takes time to build and implement practically in life.
When is A Good Age To Start Saving
Parents want everything best for their children. Similarly, only focusing on studying and ignoring other activities is not best for your child. The art of saving money is equally essential for a child’s future where only you can shape their money management skills. The more you instill knowledge in them, the more likely they will succeed in the future.
Nearly half of parents say they lack chances to speak to their children about money and finances, according to T. Rowe Price’s 11th Annual Parents, Youth, and Money Survey. A quarter of parents said they are somewhat hesitant or highly hesitant to talk about money with their children.
When is a suitable age to learn about money?
Age 3 is the correct way to begin. Kids as young as three years old (preschool) will start to comprehend the idea of money. A child’s natural interest and desire to learn about new topics can help them better understand money. These cuties begin to identify and differentiate numbers and the importance of hiding cash.
Age 7 is the best answer. By the age of Age 6-12, a child’s habits are already set. Your children will have a better understanding of the importance of money. However, you can give them logical reasoning to help them understand more about the importance of savings, the need for money, and the necessity of capital.
It would be best to show them how to use a debit card, which will prepare them to become successful credit card users in the future. Planning ahead, finding or differentiating budgets, and relying on their intuition to save money are skills that children of this age can master.
Young teens from age 13-21 are self aware about money. You can develop their critical thinking skills, which will aid in their decision-making. You can encourage them to deposit on the bank and teach them about banking terms such as interest. If you trust your kids, you should prepare them for a credit card.
How to Encourage Kid to Save Money?
Everyone has unique styles and ways to save money. But what makes the difference is the ability to convey the real meaning and importance behind cash to a child. Until a kid realizes the essence, they cannot initiate the habit of saving money. So here are some ways to encourage kids to save money:
1. Give them daily allowances or lunch allowances
Until you give some money to children, you cannot encourage them to save money. And what’s the good way other than providing the allowance or meal allowances?
- Set a fixed amount of cash regularly or weekly. Then whether they save money or not is not your concern but your child’s.
- Plan ahead of time to figure out how much money they’ll need, and add a little extra money to encourage them to save money.
For instance, when your children want to purchase an object such as toys, or other items, do not grant them any money. Instead, teach them to buy from saving cash.
- Teach them to gradually save money by purchasing a piggy bank or a savings jar and showing them how to accumulate money such as coins and cash.
- Always start with the initiation, and they will learn from you. For a teen, you can encourage saving by opening a bank account. Similarly, provide them with allowances and some extra money to save in the bank.
- Another option is to ask them to save money up to a certain percentage and reward them.
When your child requests a book, for example, you should remind them to save up to $100 and compensate them with extra money to purchase the book, thus reinforcing their saving habit. The more you limit your child’s demands (i.e., worthless items), the more they are encouraged to save.
2. Create an opportunity to earn money
What better way to demonstrate the worth of money than to show it themselves? Earning money teaches you a lot of dedication, hard work, and the value of time. As you may experience, hard work helps to understand the importance of money.
A survey by the American Institute of Certified Public Accountants (AICPA) reveals, two-thirds of parents will pay their children an allowance in 2019. Children receive an average of $30 per week based on five hours of chores.
- Your child can do simple household tasks such as cleaning windows, cars, and mirrors.
- Ask them to assist you in house chores and earn extra rewards.
- Encourage them to save money by providing them with an allowance after the task is done.
- Additional money, prizes, or even an extension in the period for the hobby they enjoy, such as games, the internet, or watching television, can all be seen as rewards.
- Do not give too much extension on gaming, the internet as it causes more harm, you can give them an extra 30 min as a reward.
3. Set out an example
Children learn by the actions of adults. So, set out a proper example to initiate them towards saving money.
- Take them to a market with you where they can analyze the way you bargain and save money.
- Again after you come back home from the market, put cash in a piggyback or savings jar to ensure that your kid analyzes and learns similar habits from you.
4. Act as a creditor
When your child is impatient to buy certain things, then why not act as their creditor? You may give them money, but they must first make a vow to repay you. For instance, if your child needs to buy $100 worth of items, you can lend them $100 and deduct the cost from their budget or allowances.
And if you want to teach younger people regarding terms such as interest, you can deduct the interest from their allowances when they fail to pay you back. One way or another, your kid will be able to learn the importance of saving. And you will be able to provide an essential lesson to them.
5. Help to keep track of spending
Encourage your child to keep track of finances by writing down the list of expenses in their notebook or diary. The expense list will help your child manage the budget and figure out how much money they’ve wasted. Further they can figure out how much of a big saver they are.
Some children complain that although they save money, they don’t know how their money disappears. To make them understand how money disappears, emphasize keeping track of cash as soon as you receive it and as soon as you hand it away.
6. Talking always works
Talking is the best weapon to encourage your kids to save weapons. Complaining too much about money brings out mixed results to your kids.
- Keep your priorities in a healthy discussion. A healthy conversation often brings the best results.
- First, ask them what you understand by money. Know how much they know about money and savings.
- Then only can you go back to your topic, explain to the kids about the cause, and save money.
- Give them an example and logical explanation to make them more aware and interested in saving money.
- Give them real-life examples of your close family members to make them more understandable.
- Explain how the value of money has risen in the past and will continue to rise in the future by using examples from your past experience.
Hearing your experience would make your children more mindful of the future and increase their trust in saving money.
- Let them be clear that you are always open for conversation, and if they want to ask a question and discuss, you are always there.
- Do not be too strict with your kids; otherwise, they will hesitate to ask questions. The more curious they are, the more interested they become in saving.
If you want your child to develop good money habits, this is the best time to start. It’s never too late to learn something, but if you’re going to build good financial behavior or habits in your kids, it’s best to start from a younger age. A good initiation from childhood brings out the best result in adulthood.
Although money is not everything, we cannot deny that we won’t be satisfied until we’re in decent financial shape. You can use the above strategies to assist your child with being financially secure in the future. If you have any other ways, please feel free to comment in the section below.