15 March 2017

How to get your child into the savings habit

Teaching kids about saving and how to handle money can seem like quite a task, but giving them good money sense early on will help them stand on their own two feet as adults.

A report commissioned by the UK Money Advice Service and carried out by the University of Cambridge last year revealed that kids' money habits often form by the time they're just 7 years old.

They also discovered that a third of teenagers aged 16-17 still don't have a good understanding of money and debt and need last-minute financial education, especially being so close to access to credit. So, what can parents do?

Saving up while growing up

It's never too soon to make the introduction to money, even for young children, just by letting them see and touch notes and coins when you use them, familiarising themselves.

As they get older, you can make it part of the everyday routine, using real-life shopping trips to demonstrate how money is used and what can and can't buy.

Pocket money is a great way to introduce the idea of a regular income. Straight away, you can bring up the idea of future planning using the 'envelope system'. Just ask them to draw a picture on an envelope or a jar label of the thing they'd like to buy and encourage them to start saving for it.

You can even introduce the difference between long and short-term saving goals: the jar with a picture of Lego on it could be traded in for the real thing much faster than the one with a picture of, say, a new bike.

Another way to teach about savings is a good old-fashioned piggy bank. Let them fill it up with money earned from doing age-appropriate chores around the house, like doing the washing up, or feeding the dog. And then you can encourage them to put the money into a savings account. Popping into a branch to deposit their money is a great way to get them familiar with saving early on.

Our Smart instant access account lets 7-17 year olds manage their own savings.

Budgeting is key

Learning how to budget can be hard even for grown-ups – but understanding how to manage the financial 'bigger picture' is a crucial skill.

You could start by introducing your child to an aspect of the family's monthly income and costs, like how you plan the household food budget – using that example to help them plan their own budget.

You can take advantage of 'teachable moments' like grocery shopping, paying bills, or visiting the cashpoint to keep the real-life example alive and help the message get through.

Teaching life-lessons about money at different ages

Learning about money is part of the journey through childhood and beyond, and you can consider introducing different ideas at different ages.

  • Pre-school

Important life lessons like, 'You can earn money by having a job' and 'There's a difference between things you want and things you need' can be introduced early on.

  • 7-13 year olds

You could try bringing up about more grown-up ideas like making price comparisons when shopping for something specific, and learning how to be patient when saving money for something you want.

  • Teenagers 

By the time kids are teenagers, within a few years of access to credit, it's a good idea to make sure they understand ideas like budgeting, that it's cheaper to use savings rather than credit, how interest works on a credit card, and the importance of saving money for an emergency.

Don't be daunted: There's lots of good ideas and kid-friendly advice out there for teaching children about money across different ages, including the Money Advice Service and our own Money Stuff Tumblr.

Investing early in teaching your child about money has a priceless long-term pay-off: preparing them to be a financially independent grown-up.

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