How can I teach my children about money and developing saving habits?

Q MY children don’ t seem to understand money. I’ ve tried various methods, including pocket money, to no avail. How can I encourage them to develop a savings habit?

A TEACHING your children about money will help them pick up good habits for the future. My children are in their twenties now but my process way back then, was that they had to save 50 per cent of every cent they got. They soon got used to this and had a nice little sum saved up by the time they finished school and needed to make their first large purchase.

We have pulled together some other helpful steps so you can show your children how to make smart money decisions:

Step 1: Keep it fun

A great way to help children get started is to have three jars with the following labels:

– Spending: for buying something now.

– Savings: for a saving goal, such as a toy, book or sports jersey. Explain why it is important to save. Help them work out the cost of the item they are saving for and how long it would take to save for it, based on how much pocket money they get.

– Future: this is money that is put away and can’ t be touched until an agreed time in the future, such as summer holidays. Teaching your child to put a little away for a rainy day is a good way for them to be prepared for what might happen in the future.

Every time your child receives money, they can decide how much they would like to put into each jar. Over time your child will begin to understand how to manage money and will be ready for the next step, opening their own savings account.

Step 2: Open a savings account

It is a good idea to help your child open a savings account.

Banks, credit unions and post offices offer children’s accounts and your child can open one with money out of the future jar. They are easy to use and have no charges.

Once the account is opened, you can encourage your child to lodge money from their savings jars into their account regularly

Step 3: Keep up the good habit

If ‘ savings fatigue’ is setting in, encourage your child to continue saving by giving them some help such as agreeing to match the amount they have saved for a couple of weeks to help them reach their goal.

Step 4: Get them involved in the money decisions

A good way to teach children about making choices is to involve them in some household budgeting decisions. For example, when planning your next family day out, give your children the opportunity to be involved in choosing where to go. Try to limit the choice to two or three different places.

Give them the total amount you have available to spend and discuss the pros and cons of each, weighing up the cost involved and the importance of prioritising what is most important to them.

This article aims to give information, not advice. Always do your own research and/or seek out advice from a Financial Broker before acting on anything contained in this article.