Children are very impressionable beings, especially at a young age – the concepts that we teach them in the early stages of their life can have powerful effects later on. But how does that relate to saving money? It means we have to start educating our kids about savings and other topics related to effective money management early on. That will result in our children having a better comprehension of financial matters and give them a solid foundation to build on. Since there are a lot of things that we can teach them, where should we begin? Here are 4 things that we believe are high on the importance list.
#1: Give Them Allowance
Experience is the best teacher – it is difficult (if not impossible) to teach kids about money if they don’t receive any. Giving them an allowance, if only a couple of dollars per week, will keep them in contact with money and make it easier for them to understand about savings. When they actually see how it is to save money first hand, they will comprehend the concept much better, and become skilled at doing it.
#2: Provide Them With Opportunities To Earn Money
In addition to giving them allowance, it is important to teach your children about work. Providing them with first-hand experience at making their own money will make them appreciate it more. As a result, they will think twice before spending it carelessly and this will help them learn the value of savings. An opportunity that you provide doesn’t need to be a complicated task – you can simply ask them to wash your car or do some garden work.
#3: Teach Them About Budgeting
Allocating cash to be used for different purposes can be a challenging task. Teaching kids about budgeting can help them understand how to divide their money in an efficient way. By doing this properly, you will teach them to always save a portion of what they earn – an essential element of any successful savings strategy. However, you shouldn’t make things too complicated. Help your kid understand the essentials and he will learn the details as he develops.
#4: Help Them Understand Compounding
This might seem a bit too much for a child to comprehend but it is in essence a very simple principle. And why is it important? Almost every parent sets up a savings account for his kid, a place where you and him can deposit money and earn some interest on that deposit. As that deposit grows, so do the interest payments, of course. But the key thing you want to make him understand is that those interest payments also make money when they are left in the account. Compounding is a very powerful principle and it is something that you should definitely try to explain to your kids.
Banks like Standard Chartered, UOB and CIMB offer savings accounts that can be open especially for kids. You can compare all the other savings accounts available in Singapore in our savings accounts section.
Want the best financial deals in town delivered to your inbox once a month? Sign up for iMoney’s Monthly Round-Up today!