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Teaching Your Kids How to Save Money


No matter how old you are, it pays to be financially savvy. Children are curious about money and through observation and repetition, can be taught about it as soon as they can count. Educating, motivating and empowering children to become regular savers and investors will ultimately encourage them towards financial independence and smart financial decisions later on in life. To help you educate your kids about personal finance, here are 13 money management tips.

Talk to your kids about your values concerning money. Teach them how to save it, how to grow it, how to spend it wisely and how to avoid the temptations of credit cards or excessive, thoughtless spending.

Help your kids learn the differences between needs, wants and wishes. This will hopefully prepare them for making good spending decisions later in life. You can help them by differentiating between things that they need (new shoes for example), that they want (a new music CD) and things they wish for and would need to save for (a new bicycle or cell phone).

Teach them about setting goals. Whether it's saving to go to the movies once a week or saving up for an iPod, goals will help your kids learn about the value of money and how to become responsible for it themselves.

Introduce your kids to the value of saving versus spending. To demonstrate the concept of earning interest on income, you could consider paying "interest" on the money your kids save at home. This will foster a continuance of a savings plan later on in life.

Receiving an allowance will give your kids a sense of independence and spending power. However, simply handing over the cash each week is not going to teach them about the value of money.

Give pocket money in denominations that encourage saving. If they receive $4 a week, give them four ones and encourage them to set aside at least $2 towards their savings plan.

Take your kids to the bank to open their own bank savings account. Encouraging regular saving habits early is one of the keys to saving success. Just remember that you'll generally need to accompany them to open their bank savings account if they're under 18 years old.

Allow them to make spending decisions. Refusing to let your kids withdraw and spend their own money could discourage them from saving. Rather encourage them to do research before making major purchases and wait for the right time to buy (like the end of season sales). Have a discussion about the pros and cons of saving or spending their hard-earned money before leaving for the shops.

Keep records of money saved, invested or spent.To encourage an element of financial control use 12 small envelopes - one for each month of the year - and encourage your kids to place receipts for all purchases in the envelopes. This could be useful when explaining the concept of budgeting as they will be able to see regular and ad hoc expenses throughout the year.

Teach your kids the value of money when shopping. Going to the supermarket is often a child's first spending experience and the outing can be used to demonstrate planning and budgeting. By writing a list of the week's shopping you can teach them to avoid impulse buying, and by making price comparisons, you show them how to check for value and quality.

First-time investors: To help demonstrate the workings of the stock market, you can allocate a few of the shares you own to your kids and follow the company's market activity together. This exercise would work best with brands that children can relate to like their local supermarket chain, mobile service provider or favorite clothing brand. As they get older, you could help your kids choose some shares to buy with their own money.

Demonstrate being aware of spending. When using your debit or credit card at the supermarket or a restaurant, show them how to verify the charges and how to calculate a tip.

Encourage regular family financial discussions. Whether this is a time for younger children to tally up their savings or for a discussion with your teenager about developments in the national and global economies, improving their understanding of finance will be useful in becoming more confident with money and ultimately, establishing their financial independence.