Learning how to properly save and budget can seem like one of the more mundane activities parents often have to do with their kids, especially in the current economic climate. If there is perhaps one thing this year has taught everyone, including children, it’s how to make your money last longer.
For many grownups, saving has become second nature, and in some instances, individuals often make saving their most important financial habit. Whether it’s planning for retirement or having a bit of extra cash available for a rainy day, knowing how to save money can help any person when they are faced with a difficult financial situation.
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This year, more and more adults went on a saving spree as the cost of living skyrocketed due to red-hot inflation. At the start of 2022, inflation ticked upwards by 7.5%, only to hit a 40-year high of 9.1% in June 2022, prompting the Federal Reserve to step in and aggressively raise interest rates to tame rampant running inflation.
With the price of nearly everything going up these days, from consumables, utilities, fuel, and schooling, children will need to know how to properly save and work with money if they ever dream of one day owning a home, or buying a car, or even paying for their tuition.
According to data from Bankrate, nearly 4 in 10 American households said that they were unable to cover an unexpected emergency of $1,000 or more. The same data revealed that at least 76% of Americans have also not seen their emergency savings balance increase over the last year as the cost of living digs deeper into their disposable income.
Seeing these shocking figures makes you wonder as a parent whether or not you have properly prepared your children for the future, and ensured they are in a comfortable financial position for when you’re not around anymore.
Whether it may be hard to have the “money talk” with your kids or not, it’s time to step up to the plate and provide your kids with the right knowledge and information by teaching them how to properly save in 2023.
Talk More About Money
Before deep diving into the technicalities of saving, it’s important to have conversations about money and how it works. While not many people are comfortable talking about their financial situation, which is more so common among older working adults, having conversations about how the world of finance works with children will give them a proper foundation to start on.
Instead of being over-explanatory, create exercises that will enhance the experience, such as reading newspaper articles or magazine clippings related to saving. Another consideration could be to ensure that children have a good grasp of technical terms, and how money works in everyday life before actually teaching them how to properly save their money.
Give Them A Small Allowance
Giving children a small allowance every month will help them see the value of money more realistically, this is of course if you’re in a financial position yourself to do so each month.
By giving children an allowance or pocket money, you can teach them how much their money is worth, and what they will be able to do with it. Depending on how much you give each child, and what their needs may be, giving cash is perhaps the best option as it gives a more visual representation of how their money can get them things they desire if they save for it.
Expose Them To Household Expenses
Another possible way to teach your children about saving money is to include them in the household expenses and monthly budget. There may be some things that you’d like to keep more private, but the sooner you expose them to how a monthly budget works, and how you as an adult save a bit each month, the easier it will be for them to follow in your footsteps.
Including children in the household expenses can be anything from showing them how much is spent on utilities, to your current household emergency fund. An even better idea would be to show them how you save up for a family trip or holiday, this way they will have a better indication of the entire process of saving for something they desire.
Use Technology To Enhance The Experience
Modern technology has made it increasingly easy to save, especially with the plethora of apps and websites that are available online. These platforms allow both adults and children to set up a monthly budget, and build up an emergency fund.
While children may be a bit more technologically inclined than their older peers, parents can use these applications to their advantage as digital tools can help enhance the entire experience.
There are loads of applications that can help calculate the time it will take to save for something when you put away a bit of money every month, and the more children have a visual representation thereof, the better they will understand the entire process.
Set Up Savings Goals For Them
Although saving money might be second nature for adults and parents, for kids it might be a bit more difficult if they do so without a goal in mind. Talk to your children about a specific item or toy they want to buy, and use this as a savings goal.
Once a person has a goal in mind, it becomes easier for them to work towards something. More mature children, those aged 13 years and older, set a financial goal early on in their pre-teens such as buying their first car or paying part of their tertiary tuition. Having a savings goal makes it easier, and children will be able to track the entire process along the way.
Open A Savings Bank Account
Although holding physical cash might be a better visual representation of money, opening a savings bank account for children can help them set up an early savings plan for when they become older.
Several leading banks offer savings bank accounts for children, and not only do these bank accounts give children a safe place to put their money, but it also creates a more mature understanding that their money is in a place where it can grow.
Parents can opt for interest-bearing savings accounts, which not only hold children’s money but can build interest over time. This gives adults another opportunity to teach children how money over time can grow if they decide to put it away for an extended time.
Encourage Saving Habits
Encouraging children’s saving habits might be a bit harder in the start, but it’s one of the more practical ways to teach children how their money can get them the things they want if they work smart with it.
Simple things such as telling kids that spending their money now on a simple toy will cost them a bigger purchase in the near future. Even better, if they spend their money on less valuable experiences such as eating out, they won’t be able to pay for more exciting activities such as visiting a theme park or buying tickets to a children’s concert.
There are small savings habits that we as adults do that help us get by every month, and although the scale thereof cannot be compared to that of a child, it’s important to take a look at how you make your money work for you, and translate that into something educational for your children.
Teach Them About Earning Their Own Money
Having a part-time job can be one of the most fulfilling experiences for any child, especially if they reach an age where they become more independent. Having a job as a teenager or young adult not only helps to teach them about money, but it also teaches them some critical life skills they might not pick up somewhere else.
Exposing children to how a job can help them kickstart a savings journey will foster more sustainable financial habits that will last for their entire life.
Of course, children are often disgruntled about the idea of getting a summer job or having to work over weekends when all their friends are out having fun. While this may be the case, the more you encourage them to get a job, or even take on some a bit of labor for cash, the easier it will be for them to understand the cycle through which they can earn, save and spend their cash.
The coming year will present another host of financial challenges, which many people aren’t quite prepared for. Though adults can put away a bit of cash now and again to help plump up their emergency funds, for children the situation might look a bit different.
As parents, it may not be the easiest task to teach children how to save or budget, or even use their money, but it’s become a crucial life skill many children require if they ever hope to live a financially stable life.
The best is to be involved in how children perceive money, and provide insight when needed, but most importantly, ensure that children are taught in a way that caters to their best interest, and shows them that working with money can be fun and exciting at the same time.