4 steps to teach kids savvy savings skills at home
Old money-conscious dogs can indeed learn new tricks, but instilling strong savings habits in kids could make financial planning easier in the long-run. So if you’ve got a brood of your own, start teaching them how to earn their keep and grow their treasure trove before they enter the workforce.
There are plenty of responsible savings skills to be learnt at home in the early days of kids’ banking journeys. Parents and carers are probably best positioned to decide what age kids will be ready to take this financial leap. But whatever stage they’re at, you can kick-start the process by following these basic steps.
Step 1: Teach them about wages and bank accounts
Keep things simple to start. Those cute little layabouts have thus far had all their wants and needs met by benevolent giants (parents, teachers and other caregivers). They may not understand the concept of trading time and resources for money, which can then be swapped for fun things and experiences (like fairy floss and Nintendo games, obviously).
Rather than simply supplying regular infusions of pocket money, get them doing household chores priced according to the time and effort involved in each job. Maybe set ‘taking the bins out’ at $1, ‘emptying the dishwasher’ at $2, and ‘doing a big clean of the bedroom or playroom’ at $5. Whatever the job, make sure it’s equitable.
Getting the scamps to manage this, perhaps via a whiteboard tally that’s paid into a good old piggy bank weekly, will encourage them to engage with the process. It’s also a good step to prepare them for their first bank account.
Step 2: Help them set goals and develop budgeting skills
We all have that inner kid who wants a pony, so it’s understandable children may need a more tangible goal than ‘financial security’ to keep them interested in saving money. Before they can move on to more nuanced concepts like emergency savings, get them to set a goal around purchasing a specific prize. Then you’ve ticked off a reward incentive too.
Within this process, you can also set out the basic principles of how to build a budget. You might not get as far as the taxation process, but you can look at income, spending and saving. To grow socially responsible humans, maybe throw the idea of ‘giving’ into the budgeting mix, even if it’s not directly to charitable organisations. Dedicating an amount to a gift for Grandma or buying dessert for the whole family could be the catalyst for a lifelong pursuit of well-managed generosity.
Step 3: Introduce the concept of savings interest payments
The fluctuation of interest rates and how economic shifts impact various facets of your financial life may be hard to grasp at times. Cut it down to the bare bones for kids as you begin teaching them good saving habits.
Essentially, they can be rewarded with a bonus amount for things like reaching a savings goal, not dipping into their stash for a predetermined length of time, and contributing to the pool a certain amount of times each week or month. This will give them a taste of high interest savings accounts with bonus criteria or set conditions, as well as the magic of receiving returns on savings interest.
If your kids are up to fractions and percentages in their textbooks, you can set the bonus amount at a certain rate – perhaps at your current savings interest rate for extra realism!
Step 4: Open them a kids savings account
Once they’ve mastered these money moves at home, help your kids dip their tiny toes into the financial realm beyond the family bubble. From kid-friendly digital banking to minimum and maximum deposit conditions, it’s important to know the ins and outs of kids’ accounts. Mozo’s guide to savings for children is excellent reading material for you and the new little saver to brush-up on the must-knows of opening an account.
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Once you’ve got the little tyke’s savings in order, rocket over to Mozo’s term deposit hub so you can map out your own long-term savings plan.
Savings accounts for kids - page last updated September 26, 2020
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