April 21, 2019 | 05:10 PM

Savings Tips

25.07.2018How to build great savings habits in kids

Most of us will remember having a piggy bank when we were children, and it?s likely that many us want to give our kids the same experience.

Most of us will remember having a piggy bank when we were children, and it’s likely that many us want to give our kids the same experience. With personal debt in Australia at one of the highest levels seen anywhere around the world, saving is a great behaviour to encourage in children as it can heavily reduce the reliance they will have on credit cards and loans in the future.

But the answer to the question of how to encourage a child to save up is a little unclear. The humble piggy bank is a sweet idea, but it’s often not enough – especially today, when the cost of living is so high and the temptation of credit is so strong. Here are some ideas on how to get the savings show on the road.

Start small

The word “savings” often conjures images in the popular mind of frugal people who have spent their whole lives sacrificing everything for a fat pension or a big investment account. But it doesn’t have to be that way. Even being able to save a few dollars here and there is a good skill to have. If a kid receives twenty dollars a week in pocket money, why not start off by asking them to save two dollars each time in a jar? By the end of the year, they’ll suddenly have over 100 dollars to spend on whatever they like – and a penchant for saving will be established.

Let them fail

However, kids will be kids, and this means that from time to time parents are likely to find themselves in a situation where their children don’t quite get it right. If a child decides they want to save up to buy a new smartphone, for example, they may start off with the best of intentions and put aside their pocket money diligently every week. All of a sudden, though, they may blow it on a new pair of jeans or fritter it away at the shopping mall with their mates.

As a parent, this can be frustrating. Some parents may feel like telling their child how disappointed they are, or simply giving them the money and plugging the gap. But neither of these solutions is ideal, as they both send the wrong message and suggest that the problem is somebody else’s rather than theirs. Instead, why not encourage them to get back on track and start trying to hit their savings goals again?

Going it alone?

For some parents who are determined to instil the importance of saving into their children, the above options may not be enough. In this case, the best option is one that leaves kids to sink or swim. By giving children an allowance to buy everything from school uniforms to ingredients for their meals, some parents decide to hand over all financial responsibility at ages as young as 12 or 13. As their kids get older, these parents may also choose to reduce the allowance and leave their kids to fill the gap with a part-time job.

This is perhaps the most turbo-charged of all the options, and it’s not one that will work for everyone. Remember, in most cases Australian children can’t work until they are 13 or even 15 – so it’s unlikely that they are going to be able to fully look out for themselves for most of their childhoods. Usually, a good balance between self-sufficiency and teaching of budgeting skills is enough.

One of the greatest gifts a parent can give their children is the skill of saving money. Not only does it mean that kids are better defended against the allure of credit cards once they’re older, it also means they can pay for nice things in their lives in a sustainable and rewarding way.

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