They say old habits die hard, so it makes sense to teach your kids how to maintain a healthy savings account as early as possible. It's a skill that will stay with them for the rest of their lives.
It's also a skill that will be ever more important as time goes by. Over the 12 months to this year's March quarter, the cost of retirement increased by 2.7 percent for those after a "comfortable" retirement, and 2.8 percent for "modest" retirees, according to figures from the Association of Superannuation Funds of Australia (ASFA).
"Rising costs also highlights the importance of superannuation, to ensure people have enough money to live the lifestyle they expect in retirement, for all their post-work years," Pauline Vamos, ASFA Chief Executive, said.
One day, your children will be these retirees making the decision of whether to retire comfortably or modestly. Before that stage, help make their decision for them and imbue them with the skills they need to build their savings accounts little by little.
Jars and goals
From the moment that children are ready to get some kind of allowance, you can teach them about setting goals. Whether it's for throwing rubbish away when they're very young or doing the dreaded household chores when they are older, you can start giving your child a financial reward. While they're at it, you could ask them to choose something they wish to buy – perhaps it's the latest soft toy, the newest trading cards or even a video game. Looking at the price, explain to them how much of the money they receive weekly they'll need to put away and how long it will take.
At the same time, you could pull out a jar and label it "savings". Have your child put in a select amount every week into the jar, and tell them that this will go toward eventually buying whatever their prized possession happens to be. Be sure to regularly talk about your child's additions to the jar. How much do they have? How much more do they need? Consider opening a children's saving account which when the time comes, can be tranfered over into a high interest savings account.
Set a good example
No matter how old your child is, the chances are they will look to their parents as a model for how to live and behave. If you want to instill the thrifty spirit into your offspring, make sure that you are living up to your own advice.
Make a show of putting money away into a jar of your own – they will come to see saving as normal and do the same when they're older. Also avoid impulsively splurging on frivolous items that you don't really need. Instead, demonstrate to your child that there is value in putting off immediate gratification. Furthermore, talk to your child about money and finances, and involve them in the spending process – perhaps next time you visit the grocery store.