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Even if you are fortunate enough in the current economic climate to be putting a little aside each month in savings for your kids, you will not be doing them any favours for their future if they are not learning the importance of saving money themselves.
Managing money well is a lifelong skill and I believe that it is never too young to start learning. Increasingly these days people are accepting that it is 'normal' to have a certain amount of debt, which inevitably can cause a great deal of stress in families. Perhaps it is time to ensure that the next generation can get out of, and stay out of, debt by managing their money well and learning to save.
Each child is unique
This phrase is often heard in terms of meeting a childs needs in terms of their education and learning, but every parent will know that it is also critically important in terms of parenting too. So when it comes to encouraging children to save, what works well for one child may not be so effective with another. Each child is unique in terms of what interests them, what motivates them, and what inspires them. As parents it is important for us to tap into this knowledge we have of our children and help them find a way that suits them when it comes to learning about saving money.
Making money real
Consider for a moment whether you child has been exposed to real money and understands what it is. In todays world of card payments and electronic transactions, there may well be a generation of children that have little concept of what money is.
We started at the beginning with putting some real coins in their role play corner for playing shops. Combined with some price stickers to help them understand that different items are priced differently. As they grew older, we also did some role play looking at "Barter exchange" to help understand where the concept of money came from. In our role play game, Josh kept sheep so could produce wool to keep warm, Daniel had cows which gave milk and mummy grew rice. We then pretended to barter exchange our 'produce' depending on who needed it, and got the children to start to come up with questions about what someone would do if they didn't need any more of a particular item or if someone else came into the equation, and how much each piece of produce was 'worth', or if there had been a failed crop of rice one year and so on...
...Until they themselves came up with the concept of money as a solution.
We also let them use real money at the bakers to buy a cake or at the sweet shop for some sweets. This has the benefit of helping them understand what money looks like, how to add / takeaway amounts of money, and even how they need to make trade offs about what to buy with their money - Do they buy that bar of fudge with the 20p they earned for unloading the washing machine earlier that day, or do they save it towards that Pocket World magazine they really want?
It all adds up
Finding a penny may be considered good luck, but let's face it, it doesn't buy you much! But...save up a hundred pennies and all of a sudden you have enough to give you some real choice and freedom in what you buy. A bag of sweets, an ice cream, a packet of crisps, a bar of chocolate, a pocket-money toy, a kinder-egg (i.e. chocolate AND a toy!).
Take it to a charity shop or boot sale and the world is your oyster - you could pick up a really cool toy for your pound.
Now add into the equation that £5 that Granny Mildred gave you for your birthday, plus that £10 from Aunt Phylis for Christmas, and then a DS game, or a whole years magazine subcription is in your sights.
Make sure you teach your kids to recognise that those bits of paper (notes and cheques) that float out of the greetings card are valuable and not to be thrown out with the wrapping paper by accident! And encourage them to write their 'thank yous' so that Granny Mildred and Aunt Phylis will know that their kind gift has been appreciated more than a plastic toy that they may not even like!
Teach them - where money comes from
When mum or dad head off to work, make sure your child understands why they are choosing to spend the day sat at a boring office desk instead of lying on the floor building train tracks. Explain that if mum or dad didn't do that how would the shopping get paid for, how would you pay for a roof over your head and most importantly (well from the child's point of view) how can mummy or daddy buy a Christmas present for them?
By ensuring they understand at a very basic level the relationship between work and money, and how shops and banks also fit into that cycle, you will hopefully avoid the scenario that my friend had from her teenage daughter.
Mum explained that no she couldn't have the latest video game she wanted because they didn't have enough money to buy every new game that came out. Daughter replied, 'well why don't you just go and ask for more money from Sainsbury's because they are always giving money to people at the checkout'. She had seen people receive 'cash back' at the tills and assumed that Sainsbury's were just giving out free money to whoever needed it!
Teach them - the difference between needs and wants
During the summer, the kids and I tried a little experiment to see how little we could spend one week (with the promise of a reward at the end of the week using some of the savings we made). Amazingly the kids got very on board and were even telling me that it would be wiser to skip having an ice cream and that it would cost less to go for an outing to the park than to the indoor soft-play area. It really helped them also differentiate between needs and wants. When they really wanted that pack of Moshi stickers, they knew that it was not actually something they needed and that they would actually survive perfectly fine without it!
Teach them - to make their own decisions
On occassions when they have said that they really really neeeeed something I have said that they can have it, if they are happy to spend their own pocket money on it. That often suddenly turns the need into a want and they realise they can cope without it. But on occassions that they still really really want an item, I encourage them to make sure that they are aware of the consuquence of their purchase decision (i.e. they won't be able to spend that money on something else in future as it will have been spent).
We have also found that their favourite online game Moshi monsters has also helped them learn about making decisions with spending. Ok so it is 'Rox' they are spending instead of actual money but it has helped them realise that they need to save up their rox if they want to buy a new 'house' for their monster and if they buy that new item of furniture from 'Yukea', they may not have enough rox left for food from the 'Grossery'.
Keep your savings safe
A piggy bank or money box is all very well but just as easily as they lose pieces of lego down the back of the sofa or under the floorboards, their coins could also meet the same fate.
Sometimes it is wiser to keep their money in a savings account where there is the added bonus that it could grow!
Next time you are growing veggies in the garden, you can illustrate this. A carrot planted and then harvested really soon after will hardly have grown much, but a carrot left for a while should (hopefully!) grow bigger. Particularly if you add to it too. So all that fertiliser and water added will help it grow even more than if it was just left to it.
Encourage children to help make the whole family make savings because at the end of the day sometimes it can be the biggest struggle to find the money in the first place to save. Help them to identify opportunities for money to be saved and money to be earned. Do they have any toys they could sell at their local second hand toy shop? Could they be quicker in the shower to save water? Do they turn lights off as they leave a room to save electricity (showing them the electricity meter whirring round really works a treat for helping them to understand energy consumption).
Help them identify any savings goals they may have. They may be saving just to have enough in case they see a new toy that they want, or they may be saving for something specific they have in mind and with a specific timescale they have in mind (like the next annual Moshi membership when their current membership expires!).
We also explain to them how money can go a lot further in certain situations and with the 4 children we sponsor in some of the worlds poorest countries, the 70p a day that might only buy us a newspaper here in the UK, can clothe, feed and educate them in those countries.
Keep an eye on Moneysupermarket.com for news of their SuperKid Savers! And if you are a blogger, why don't you share some of your top tips for encouraging children to save money.