Tuesday, May 8, 2012

10 Tricks to Getting Your Kids Learn About Saving Money from Their Allowances

Ally is going to give me some advice about how to encourage Eliza to save money, and I thought it might be of use to you as well. We can all do with a little bit of advice on how to save money, and it might even apply to those who don't have kids too. Thanks Ally :)
Kids are naturally a bit short-sighted when it comes to things they want, from the candy bar at the checkout counter to the shiny new bicycle in the window of the nearest toy shop.

Unfortunately, because money management is such a difficult topic, and one that many adults still struggle with themselves, some parents tend to avoid the subject with their kids. However, while children should never be involved in complicated matters like bills and credit card debt, allowances can provide the perfect opportunity for money saving lessons.  

1. Don’t give out more money once the weekly allowance is finished

Giving out more money after the allowance has been spent will only teach your child to live beyond their means. Explain that since they spent their whole allowance on the weekend, they won’t be able to afford any extra treats for the rest of the week and will have to wait till next “payday.”

2. Set up a goal chart

Children need motivators, and unless they can clearly see their progress, they will lose interest. Create a simple goal chart that tracks their progress and outlines how much they will still need to save in order to afford that new toy or video game.

3. Use different savings jars or envelopes for different goals

If your child has a few things they are interested in saving up for, you could use different piggy banks or jars that are labelled with both the name of the item they are saving for and the amount they need in order to purchase it.

4. Offer extra little rewards for chores around the house

Learning that money doesn’t come for free is another important part of learning to save. By allowing your child to take out the trash or help out with the dishes in exchange for some extra pocket money, you can help them to understand that money must be earned.

5. Take your child bargain hunting

Taking your child out to different stores to look for the best deals will teach them to be careful with their money and not spend it all in the first shop they walk into.  

6. Help your child differentiate between needs and want
If a child can tell the difference between things they really need and things they just want, they will be able to identify what their priorities should be.

7. Help your child open a savings account

Don’t let the bank remain an ominous and unfamiliar environment to your child. Help them to open a savings account as soon as possible and teach them about how things like interest and ATM cards work.

8. Help your child recognize real value over marketing hype

Marketers start targeting kids from an early age, but helping your child to recognize the good deals over the ones that are simply hyped up to seem better than they actually are will help them to become savvy spenders.

9. Don’t tell your child what they can or can’t do with their allowance

Even if you see that your child is on the brink of making a bad money decision, don’t stop them from making that decision. In the long run, mistakes are often more valuable than good decisions, and it is better to let them try and fail now, than later on in life when they have more to lose.

10. Set an example

This is another case where the saying “practice what you preach” is applicable. If you are not setting a good example for your child, you will have a difficult time getting them to see the importance of saving their money.

Ally is part of the team that manages some of the most successful personal finance sites in Sydney, Australia, which provide useful tips about Budget Planner &  How To Save Money Fast. Before joining the team, she was a Media Planner in McCann Worldgroup Philippines, Inc., wherein she had the opportunity to work on several innovative and globally recognized projects.

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  1. Hi April. Its great that you have this kind of foresight. My parents always said to 'save', and that's it! They didn't coach us through temptation, they didn't take us or our money to the bank, they didn't give us any hints or tips to save. So I would 'save' for a day and then spend money! When we were older and getting credit cards, they didn't give us any hints then either. Enter Mr Moi and his accountant ways and his thrify upbrining by his financially savvy (definitely not rich, just financially intelligent) parents, and I'm usually more frugal than him these days! Saving is great. I barely regret any of the things I didn't have in my 20s, and our aim is to pay off the mortgage in full far quicker than the 30 year terms!

  2. April while all of these tips are good, I think the best one of all is "set an example" if you don't do that then all of the others may just fall by the wayside.

    I think the trick is for kids to know and appreciate where money comes from (usually hard work) and to realise its value.

    It's probably the most important lessons you can teach your children


  3. LMM, my parents never really taught me to get through temptation either. It is only in the last few years I have been able to resist certain things, but I still have a long way to go.

    Lesley, good advice. We recently applied for a mortgage and were told we could borrow quite a princely sum, a sum that would buy us a very lavish home, but would mean we would feel every interest rate rise. Instead we opted for a more manageable sum for a lesser home, but it means that if we put extra money towards the loan we could be mortgage free in half the loan time. That sounds like a good plan to me :D

  4. That's a brilliant plan April!
    Whenever I've applied for a loan, I've always done my own sums to make sure I'm comfortable with the repayments, no matter how much a lender was prepared to hand over. Although one time, I was knocked back on a loan (very small by todays standards) because the lender said I was getting into too much debt, even though my repayments were going to be far less than the monthly rent I was paying.

    I went somewhere else and they were very happy to take me on, so I changed my other loan over to them.


Thanks for your comments. I love seeing what you have to say, so write away!