How To Help Your Children Save For The Future

There are many valuable gifts that parents can give to their children, but among the most important has to be the skill of managing money. By teaching your children how to manage their own finances, as soon as they are able, you will be providing them with a solid foundation for success.

Despite that, many parents find it difficult to talk to their children about money. Sometimes, this is due to embarrassment about the subject, or a feeling that finances are not really “for kids”. Either way, this can lead to children reaching the brink of adulthood with little real idea about how money works, how to manage it, and how to save it for the future.

In this guide, we’ll help you out with that. We’ll look at tried-and-tested methods you can use to instill good habits in your children, and get them used to saving for their own future. When we talk about children’s future, education is the most important phase of their life. Parents need to make the best education investments for their children.

Start Young

The first myth when it comes to financial education is that children are simply too young to understand how money works, or how to manage it correctly. This is not true – a financial education can start as young as ten years old, as your child’s financial habits are beginning to form.

This doesn’t mean, of course, that you should give your ten year old control of the credit card.  Instead, you can begin to teach them about the basic way in which money works today. Of particular importance is explaining that credit cards represent the money you have in the bank, and that buying something on a card uses real money. This can be a difficult idea for children to grasp, but persevere and your kids will get it. Teenage is the best time to save money for the future.

You can also employ the age-old technique of having your children pay for items in stores using cash – using your money, of course. Counting out coins and notes is a good way to improve their familiarity with money, as well as the basic math skills they are learning in school. 

Creating the habit of saving

When children reach the age of 12 or so, it’s time to start teaching them about saving. It’s important to do this at a young age, because most children below this age have a very one-dimensional approach to money. This is not surprising – they see you spending it, but they don’t see you saving, and so they come away with the impression that money is just to buy things.

Read The Tips and Tricks to Save Money if you Live in Dubai.

There is a traditional method for teaching children how to save – start small, and give them a place to store their savings. Explain to them that they will have to save up if they want to buy a particular toy (or other item), and give them a jar to start collecting these savings. If you pay them an allowance, encourage them to put some of this into their savings jar, and maybe even work out how long it will take them to save up in this way.

Teaching children to save in this way teaches them many valuable skills. Not only does it get them into the habit of saving, but it creates a connection between the savings they are putting aside today and their future enjoyment of them. That means you are also teaching them delayed gratification, and discipline. All of these skills will be invaluable as they grow up and start to manage their finances themselves.

Read what our CEO & Financial Advisor Bilal Majbour says on the Importance of Investing for Your Children.

Create opportunities to earn

The next part of the equation is giving children the opportunity to make the connection between work and money. We are not suggesting, of course, that you send your kids out to work at a young age! But there are a number of ways that you can simulate the process of working, and then getting paid for this work.

One of these is to require children to do chores around the house in order to receive their allowance. This is also a tried-and-tested technique, but you should be careful about using it too much. If you pay children for every chore they do around the house, they will come to the problematic conclusion that a job is not worth doing unless they are getting paid for it.

In other words, there should be some tasks that children are required to do anyway, and another set that they get paid for. By rewarding them in this way, they will learn to associate hard work with extra money, while also recognizing that a lot of the work that is required to keep a family home is unpaid.

As your kids get a little older still, they may be able to pick up jobs in the neighborhood as well. This should be encouraged, because establishing a working habit at a young age is crucial for success in their later careers.

Making smart spending decisions

The final part of the puzzle here is to teach children how to be smart consumers. Up until the age of 14 or so, they will have used money either to buy things that they want, or save up to buy things that they want. 

Managing money is, of course, about far more than that. Spending a little less on the weekly groceries, for instance, can make a huge difference in the long term. So that’s a great place to start – by the time they are 16, you can ask your kids to go to the store for you, with a budget of course, and ask them to buy the items you need.

Exercises such as this will eventually teach them that the cost of items does not necessarily reflect their value or quality. 

The Bottom Line

Establishing good financial habits at a young age is one of the most important lessons you can teach your kids, because these are skills that last a lifetime. By giving them a solid foundation for success, you are furnishing them with a future that is stable, successful, and happier.