This, of course, means setting a budget – and deciding what to do when children run into the difficulties of following their own guidelines.
One answer is to teach them to save their pocket money in a “piggy bank” or lockable cash box. But since this doesn’t teach restraint and you won’t always be around to oversee savings deposits or withdrawals, there are more constructive ways to make the point – like helping them set up a saving account with your local bank.
How to teach your children financial responsibility:
The younger your child, the more limited his or her concept of time is. Whereas, older children shouldn’t have as much trouble understanding the concept of saving money if they have been receiving your financial teachings from an early age. If not, illustrate the concepts by introducing long and short-term goals, eg: purchasing a new video game this month versus a bicycle for the summer. Then, help them further by consistently reminding them of their goals to keep them from straying.
The more worthy and ambitious the long-term goal, the more you may want to consider matching your child’s savings. For instance, every Rand he/she saves, you could add an additional Rand.
Most young children understand that the bank is a safe place to keep their money because that is where their parents keep theirs. Let them keep a log book of their deposits or get them a statement from the bank to let them track and show the progress of their savings. Count their money with them periodically and tell them how close they have come to their goals. Above all, praise their progress.
The best way to encourage sound spending habits is to show them.
When planning a trip to the mall, get them involved in making a list and sticking to it. This will teach them to avoid impulse buying or buying items they don’t need.
For ‘more expensive’ items, such as electronic goods, teach them how to do the research, eg: reading articles and reviews, phoning stores to see if their choices are in stock, negotiating with salesmen on price, going to several places to see what’s available and comparing values… not just buying because it is the first available product they see.
Sometimes, an occasional purchase will be defective. No problem. Use this to demonstrate the importance of saving sales receipts and warranties. When you return the goods, take your children along and show them how to overcome salesmen’s arguments.
GOOD LUCK and keep at it!