Tips: Teach your kids how to save money

National Teach a Child to Save Day on 27 April offers an excellent opportunity to launch initiatives to change South Africa’s poor savings culture. Children need to learn how to save money from as young as possible. The country’s steadily declining personal savings rate is spelling disaster not only for individuals but also for the economy as a whole.

At 16.3%, South Africa has one of the lowest savings rates in the world, and this has enormous implications for financial inclusion as well as economic performance. A healthy relationship with money, which includes a commitment to long-term saving, begins young, and so a day like this should be leveraged to get children tuned into the importance of saving.

It’s a challenge in today’s culture of instant gratification, but parents and educators can work together to develop fun ways to help children get the savings message:

TIPS ON HOW TO CHILDREN CAN LEARN TO SAVE MONEY

MAKE IT GRAPHIC

For younger kids, a clear jar that shows how the money inside is accumulating is a powerful introduction to saving as is counting out some of it to make a purchase!

LEARN ABOUT THE CONNECTION BETWEEN WORK AND MONEY

From as early an age as possible, get kids to do chores around the house and consider paying them rather than simply dishing out an allowance. The money can be put into a jar or bank account, as appropriate — but the connection between a job well done and reward is vital to understand. The important point is to show them that money is not there to be spent but also to be accumulated.

GET THEM GOAL-ORIENTED

Saving will only take root in a child’s consciousness if they can see the point of it. Children always want stuff—don’t just give it to them. Let them start to save for what they want, or at least a portion of it, and they will get the message quickly enough. The big lesson: learning how to distinguish wants from needs. Keep things graphic by creating a chart with the child’s savings goals and progress made. One technique could be to offer incentives for saving, such as a matching contribution from the Bank of Mum and Dad towards a mutually agreed goal.

GET THEM INTO THE BANKING SYSTEM AS EARLY AS POSSIBLE

Cash will always have a place, but digital payments and accounts are the way of the future—financial inclusion is a by-product of learning how financial systems work, and how to make them work for you. Make a big deal of the child’s first bank account so they see it as a milestone on the road to growing up.

LEARN ABOUT INVESTING

Children and young adults that understand the link between work and money, and the need to save, also need to be exposed to how to make their savings grow. Start with banking products like Nedbank’s tax-free account so they can see their money expand, and then start talking to them about other approaches such as buying unit trusts, for example.

SET A GOOD EXAMPLE

There are multiple angles here, but the big point is that money habits are formed by the time somebody is seven years old. Adult family members should be intentional about how they talk about and use money. If it’s a source of conflict, that will affect the child’s future relationship with it. It’s also worth sharing with your children how you are saving and what for—Christmas holiday, a new car, high school, your retirement. This is an important expansion of the previous point about being oriented towards goals.

Nedbank’s advice would be to talk to your children about money, what it means and how important it is to save it. The more familiar they are with how money works and how they can control their own destinies through saving, the more likely they are to develop a savings habit that will stand them in good stead throughout their lives.

Article originally published by Tanyaradzwa Pamhirwa.

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