How to teach your kids to save

By Andrew Willink
10 September 2008

Most of us get to a point our lives where we are thrown out into the ‘real world’, and are expected to deal with bills, mortgages, and budgeting. All of this is a given, but what makes someone handle these responsibilities better than others?

Obviously, the amount of money earnt is a major factor; however one’s ability to save is equally as important.

Generally the ability to save is derived from an understanding of savings as a child; and whilst many may try to learn later on in life, it is very hard to kick those old bad spending habits. Here are some tips and explanations on the basics of savings, and a few ideas on how to teach your kids the importance of money.

1. Begin with the basics - explain that ‘savings’ is exactly what its name implies; that you must accumulate the money over a period of time, it will not appear overnight. When your child first starts earning money, teach them to regularly put money into a savings account. Often scheduling payments into their savings account will help; this eliminates the possibility of ‘forgetting’ to transfer payment.

2. A piggy bank is another helpful savings mechanism. Even small gestures, like encouraging your child to put their loose change into the piggy bank at the end of the week or day, will help to begin a healthy habit.

3. Teaching your child not to spend money unnecessarily is another important lesson. Explain to them that by saving their money, rather than spending it on something unnecessary, they will be rewarded in the end; by having a sum of money to use on something worthwhile, such as a holiday, a car, or a house, etc.

4. Teaching your child the benefits of paying in cash can also aid their saving habits. By setting aside a certain amount of cash to be used each week, one not only learns valuable budgeting skills, but is also better able to maintain a watch on the amount they are spending.

5. Finally, and arguably the most important savings lesson you can teach your child, is the concept of a credit card. Explain to them that a credit card is not an endless source of money, and that it must be paid back, often with interest. Clarify that using a credit card should not be just an alternative option to using one’s own money; but rather should be a last resort, and only used when one is absolutely certain that they will be able to pay it all back.

These lessons, may seem trivial and basic, but are also the biggest problems that people encounter when trying to save in their adult lives. The importance of learning these lessons as a kid therefore, is essential, and will aid tremendously when they are thrown out into the ‘real world’.