Teaching your kids to save!

2015-02-12 Saving kids

More than once, I have had clients telling me that I should conduct seminars for young kids to teach them the concepts of saving and investing. Some parents are concerned because their children seem not to have any concept of money or understand that money can be a limited resource too. And because we live in a very different era (we are MUCH luckier than the older generation who went through the tough times), many of us also no longer preach that thriftiness is a virtue.  That is the reason why we often hear kids ask “Why can’t I have it?” “But she has it too” “I want to eat at restaurant” or “I want to go to disneyland”
Most adults know why they say no – because we don’t want to spoil our kids (though we often do), because we know it would be a waste of money to buy our kid the 53rd Mickey Mouse plushie and because we know that the money could be better spent elsewhere. But while we know all these, we rarely explain to our kids why, nor do we explain to our kids the virtue of thriftiness.
And I believe that is the core reason why kids do not have a good grasp on the concept of money. Simply, because we do not tell them why and because we do not allow them the environment to practise. So here are three practices to look into implementing for your kid 😉  

 

#1 Make it relative, and let them choose (educating them on the value of things)

The next time your kid wants to buy a new plushie, relate the cost of the plushie to their favourite snack instead.
For example: “If you do not buy that plushie, you can use the same amount of money to buy 15 sundaes over the next 3 months.  Do you want the plushie, or the 15 sundaes?”. Make it clear that if they were to buy the plushie, they would have to live without ice cream for the next 3 months – of course, it would be a torturous 3 months of crying and screaming but live through that and it will gradually get better. This works because they place more value on the ice cream sundae than the money in your pocket. Sundaes matter to them. And if they were to choose the ice cream, remind them every single time that they are enjoying the sundae because they chose not to buy that plushie.

Point to note 1: Kids are smart these days, they know that you can afford to give them both the plushie and sundaes – so it is useless (and likely a lie) to tell them that you do not have money.  Hence, simply let them know that you are only going to spend $X on them and that they have to choose how they want to spend it. If they already have the habit of getting their way all the time, then this method would be tough but all the better over time.

Point to note 2: It is ok to oblige to your child’s wishes from time to time. This will teach them to accept both the ‘Yes’ and ‘No’ of life.  Sometimes they have to choose, sometimes they can have it all.

#2 Bring them to a less developed country (allow them to appreciate the life they now have)

I think it serves to bring young children to the less developed parts of the world. This will allow them to realise that there are people who are living in less than ideal conditions – people who go without food for days at time and people who live on very simple ways. It is not about scaring them. It is to teach them that a spectrum exists, to show them in the purest form of how people work and earn their living. It is to inculcate gratefulness for the life that we already have and to learn to strive towards a life we can look forward and work towards to.

I have been to the less developed parts of the world and I have met the parents who brought their kids to these places – there are real and tangible benefits of it.

 

#3 Saving, Spending, Sharing, Growing/investing (teach them the purpose of money and to appreciate patience + delay gratification)

And finally, the Money Jars that most of us are familiar with. However, aside from the usual Saving, Spending, Sharing jars, start another jar for Growing.

With some alterations, I think this works best:

  • Spending: Money in this jar can be used for anything that your kid wants to buy, at any point in time; sweet treats, snacks, small toys etc
  • Saving: Money saved can be used to buy the ‘bigger purchases’ – for example a new toy. To make this work, bring your kid for a shopping trip to choose an item that he likes and make it a point that money saved in this jar will be used to buy that toy. (while this isn’t exactly saving, it will teach your kids on how to delay gratification and this may be what helps them save towards buying their car/house in the future)
  • Sharing: Money in this jar can be used to give to a charitable cause (e.g: for the needy/sick. if they have done #2, they should be able to appreciate why they are doing so. After all, children have the hearts of gold.)
  • Growing: Make it a rule that money in this jar can only be used after half a year (it may be good to start off with a shorter time period of 3 months). The key is to match your child’s saving (earn interest). Save into the jar as they save as this would excite them to save more into this and also encourage them to stay patient. Of course, they will lose the ‘interest’ earned if they use money from this jar prematurely.Label the jars well, so they know clearly what each jar is for.

On top of the pocket money that they receive, also assess the other conditions that will allow your child to earn additional money. Being a good girl/boy does not suffice. Instead, it would be good to have them earn it – reward them for effort (such as helping you with the housework) and reward them for great ideas.

But now, with Chinese New Year around the corner, maybe we could kickstart it all by using a small portion of their Hong Bao money. What better way to start the year right, right?

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Yvonne Lim

Daughter, Wife, Mother. Traveller. Independent Financial Advisor

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