Teach the value of saving to your child

Sharath could have easily walked Anya down to the shops the same evening and bought her the doll with a swipe of his debit card. But he had taught her an important money lesson – the value of waiting. Children, even three-year-olds, are capable of understanding concepts like saving money, or spending it. When it comes to teaching children the importance of money, it is never too early. Start by teaching them to take good care of their toys and belongings, besides not wasting food and water. This teaches them to indirectly save by reducing wastage.

As they grow older, you can guide them on the basics of savings, types of investments and managing money. Our expert blog here, with inputs from Franklin Templeton Mutual Fund, gives you a step-by-step guide on how to initiate children into savings.

How Can I Teach My Child To Save Money?

Lessons in saving need not begin with money. Here are some easy ways to teach your young child to save-

1. It's never too early: Even at age 3, you can start by teaching your child to reduce food wastage, or recycling toys
2. Teach your child about resource conservation:Explain that fans, lights and taps should be turned off when not in use, not only at home, but in public places, too. Speak to your child about villages in our country that seriously lack power, water and even food, to communicate the message of conservation. This message can later be extended to money as your child grows older
3. Curb impulse-buying: Your child's wants change as he grows older. When he asks for something he desires, like sports equipment, PlayStation, gaming devices, toys, or a tablet, take this opportunity to teach him about money. Instead of giving him the toy directly, make a challenge where he can put aside money over a period of time. The item can then be bought from the accumulated amount. This can curb the urge to buy impulsively,and communicate the principle of 'save first, buy later'. Parents may also try to avoid meeting all demands 'easily' (immediately) but instead stagger it over a few months or even a couple of years. All this would inculcate the habit of patience in the child. For instance you need Rs.30, 000/- to buy him a new laptop. For this, invest Rs.3000every month in avenues like mutual fund schemes and let him see it grow to Rs. 30,000. Use this money to buy the laptop. Show him the money that the money gets accumulated in the account until the target amount is achieved
4. Start a gift piggy bank: Accumulate any cash received on the child's birthday or any other occasion in her investment account so that this can be used to buy something later. Story telling is also a good way to cultivate this habit like say the story of the King and the Game of Chess, which teaches the benefit of compounding

What Is The Right Age To Start Teaching My Child To Save Money?

If they start saving money in a small way, how should that money be optimally used to emphasise the point that saving is important? Like we've said before, the process of saving can start early – even as early as age 3. Initiate it by teaching the child the need to conserve resources such as food, water and power. Teach them to care for their toys by reiterating that damaged toys will not be replaced immediately. This will help the child extrapolate this habit to preservation of money in the future. When your child is 6 or 7 years old, you can teach them money basics starting with type of bank notes, cheques, pass book and basic account statement. Make learning fun by visiting a bank, ATM, post office or a mutual fund office. It is important to develop an attitude to save rather than just knowing how to save.

How Can I Teach My Child To Use The Saved Money Optimally?

If they start saving money in a small way, how should that money be optimally used to emphasize the importance of saving? Saving can be nurtured as an attitude with an emphasis on patience, regularity and discipline. It is also important to know and imbibe the concept of 'save now, buy later'. Impulsive buying of big-ticket items should be avoided and must always be routed through the saving route. A child can also be taught to be frugal at times rather than being prodigal so that the habit of saving gains stronger systemic roots.

Financial Tools Or Activities That Aid In Making Sound Saving Decisions

Are there any activities or financial tools that teenagers or older children can independently take decisions on? There are various saving calculators available on the internet. You can teach your child to create saving and expense tables as he grows. If MS excel is taught in school, he may prepare the tables in excel as well. However, you may stick to practicalities with more live examples for better understanding.

For example

1. if the cost of the item is Rs.55 and you give a Rs.100 note, how much should the vendor return
2. if you save Rs.2000 every month for 12 months, how much would you save in all
3. if one ice-cream costs Rs.15, how much would 4 ice-creams cost? Involve your child in such purchases wherever possible so that he learns about money and savings as it actually happens. Visit to banks, ATMs, post offices, mutual fund counters must be encouraged and the transactions there should be simplified and explained to him. An older child can also be taught the concept of compounding and how money multiplies faster with passage of time if well invested

Your child watches you and learns. Set an example to her by being careful with resources, and you will be amazed how quickly she learns to save. Involve her in discussions that she is ready for, and build her confidence.

Did you find these tips on teaching your child to save useful? Please do share your views and feedback with us in the comments section below, as we would love to hear from you.