Think you have ages to teach your child about financial responsibility? Think again.
A child’s money habits can often be formed by the age of seven, and that these habits are hard to break, even as they head into adulthood, according to research from the University of Cambridge.
A great way to teach your child about the value of money is by getting them a savings account. Here are Mozo’s tips for replacing your child’s piggy bank with a bona fide savings account.
If the savings account is for your child, but the contributions will not be made by your child (i.e. if the account has been established to fund your child’s future university fees, or give them a deposit on their first house), it’s probably best to open a high interest saving account, term deposit, or look at other investment options like index funds and not a children’s account. These options will generally earn you more returns.
When you think about it, opening a bank account is a very abstract concept. You give your money to a provider, and if you keep it in there long enough, they give you some more money at the end of it? While you don’t need to brief an 8-year-old on how the GFC started, it’s important to involve them in the discussion, so they know what it actually means to deposit money each month into a savings account. It could be as simple as visiting the branch with your child to let them deposit their bundle of cash themselves.
In addition to encouraging your child to save the $20 note they got from grandma at Easter, consider paying your child pocket money in return for completing household chores like cleaning their room or finally tidying up their endless lego mess. Research by The Greater Building Society found that less than two thirds (63%) of their customers paid their children pocket money, despite it being a great way to teach kids about earning money and being responsible.
It’s all well and good to teach your child about earning money, but it’s important that they also understand the value of what they’re saving for. Start with small goals ($5 to buy their favourite magazine at the supermarket) before introducing some bigger goals ($60 for a new PS3 game), so your child can see that saving works.
While it’s bad form to fill up your child’s bank account at your own accord, a little bonus to reward a hardworking saver doesn’t go astray. So encourage your child to save by letting them know you’ll give them $10 once they reach a balance of $200 etc.
Ready to set up your kid’s first savings account? Check out the winners of the Mozo Experts Choice Awards for kids savings accounts.