Teaching your kids how to save while they are young can be a life-changing experience.
It is important for children to understand from a young age that money isn’t just for spending. When kids first start learning about money, they are often observing spending. They may have witnessed a parent buy groceries or gifts before understanding what it means to earn this money and why it is important to save.
Educating your kids on the topic of money when they’re young will set them up for financial success in their adult years. Learning about savings will help them understand how to create meaningful goals and plans for achieving these goals.
Allow your kids the opportunity to learn how to earn money
The first step to teaching your kids how to save is by allowing them the opportunity to earn money. A common way to do this is through pocket money. Your kids may receive a weekly allowance for completing certain chores around the house, similar to a salary.
This allows children to understand the value of money and that you need to give to receive. If your kids want to boost their allowance, they could negotiate a higher rate if they take on additional jobs around the house. Again, this is reinforcing the value of money and where it comes from.
Teach long-term vs short term savings
Once they have a good understanding of how to earn money, your kids will start to make decisions about how they want to spend their hard-earned money. Maybe they want to spend their pocket money on a treat after school or a new bike that they have had their eyes on.
Your children need to understand that their money can only go so far and that’s where they need to set goals for the short term and long term. Sit down with your child and talk about how they want to spend their money. Together you can map out how long it will take to make those long-term purchases and whether it is worth making short-term purchases in the meantime.
Educate your kids on investing strategies
When introducing the topic of savings, it is important to highlight the concept of investing. If you are opening a bank account for your kids, teach them about compound interest and how their money will grow if they take a long-term approach to their savings.
APS Term Investments help children understand the value of growing their money through a set-and-forget approach. They receive a higher interest rate (up to 4.00 p.a.%) and will see the benefit when the time comes to withdraw. Sometimes parents or grandparents will contribute as a way of showing their young ones how the value of saving can increase over time.
As they get older, you can teach your children about other strategies for growing their wealth such as shares or the property market.
Starting young will pay off in the long run
There is so much to learn when you’re young and by starting earlier, you can set your children up for financial success. If they can learn how to save while they are young, your kids will be thankful in future years when their savings can accumulate faster.
Get in touch with the APS Savings team if you are interested in learning more about opening a Term Investment for your kids.