The most common and practical way to decide when to start saving is by setting your desired goals. Are your goals short-termed? Such as buying new shoes or for your short trip? Or is it longer? Such as buying a new house or car?
Thus, everyone has their perspectives about saving money, and as such, there is no specific age to start encouraging your kids/child to save money. It depends on an individual’s will. Some may have the habit of saving from an earlier age, while others may start saving after their teenage years.
However, research from the Consumer Financial Protection Bureau suggests that children are “developmentally capable” of saving at age 5, and the money habit can be formed from the age of 7. So, as parents, teaching your kid about saving money is not only a good idea but also an essential life skill.
But sometimes, it may work just the opposite as you thought. For example, unknowingly, you may give birth to a money-minded personality. Thus, parents need to know from what age they can start teaching about money-saving to not hamper their kid’s mentality.
If you are confused about what age is good to start encouraging your kids to save money and how you can encourage them, this article is for you.
What is a good age to start encouraging kids to save money?
There is no such definite age to start encouraging your kids to save money. However, you can still give your kids some knowledge about the monetary concept from an earlier age, and there is no harm; instead, it helps your kid learn about the importance of money. So, if you are parents and are confused about how you can approach your kids for saving, here is an age-by-age guide that lets you know how you can approach your kid to start saving according to their ages.
Ages 3 to 5: Make the concept of money familiar to them and its uses
The best age where you can introduce your kids to money is when they start counting. And, it is the best age to teach your kids the concept of money and why we need them while purchasing goods.
Give your kid coins and make them count or sort coins. You can help them to identify each coin. One way to do this is by playing a coin identification game. You can make your kids match the coins to the image along with their names.
Kids are fond of playing new and exciting games. So another way to make your kids educated about why they need money for purchasing purposes is by simply playing a game with them, where either of you can be shopkeeper and customer. Of course, your kid won’t understand the finances behind money at this age, but doing so, helps your kids understand the uses of money.
Ages 5 to 7: Make them understand the value of money and cost of goods
As stated by the researchers at the University of Cambridge, kids of this age begin to understand the importance of money and set prices. At this age, you can acknowledge your kids about why mom or dad go to work, how much different toys cost, how people earn money. You can also play the shopkeeper and customer game again, but this time by associating prices to each item.
Many experts also say this is the right time to start giving your kids some allowance, such as providing the same amount of dollars per their age. For example, suppose your child’s age is six, then you can give $6 per week. It is one of the efficient ways to teach your kids about managing money.
Ages 7 to 10: Enlighten them about the difference between “wants” and “needs”
As parents, it becomes crucial to enlighten your kid and make them understand the difference between “wanting” something and “needing” something. Kids often seem to get confused about whether they need it or they would like to have it.
So it is the right age to educate them since kids of this age begin to understand the quantities of money and their values. In addition, by this age, your kid’s understanding of addition and subtraction has advanced enough to understand them about the broad concept of money coming in and going out. You can show your kids and make them aware of household billings to have some idea about income and expenditure.
Ages 10 to 12: Give an idea on comparison shopping and being a savvy consumer
By this age, your children are capable enough to compare the number(greater or smaller). Therefore, it is the best age to let them know about comparison shopping.
You can take your kids to the supermarket or somewhere else for shopping. Make them read the store’s price labels, look at the size of items and their price, and compare them. Also, do not forget to take quality into account while teaching your kids about comparison shopping.
Another way you can apply to your kids is by making them sit together with you, ask them to make comparisons during online shopping, and explain the reason behind their decision about what’s worth buying or which one is better to skip.
Ages 12 to 15: Teach them some basic accounting
The age between 12 and 15 is the most appropriate age to let your child experience what financial independence means. By this age, your teens start going out with friends and start spending more money than before. Expenditure can be higher than income because their income was only the allowance given by you until now.
So your teens need to keep in mind that they need to start working by this age, and as parents, you also need to be supportive in such cases. You can support them emotionally, morally, and mentally. Moreover, as parents, you need to make sure your teens that saving money does not always mean keeping cash with you or keeping them in the bank or your bank balance; it is more than that. Educate them that investing money in shares is also saving with even more significant potential.
Ages 15 to 19: Explain the concept of credit cards
Teens can apply for their first credit cards at the age of 18. According to the article published in fool, 54.3% of teenagers between the ages of 18-20 obtain their first credit cards. However, you can give your teens a concept about credit cards and their working procedures from age 15. Take your teens with you whenever you pay money through cards. Note: do not share your PIN with your teens. Make sure your teens get the basic knowledge about credit cards, their demerits, and the high interest rate that may be charged by the bank when not paid entirely high interest by the due date by 18.
Besides, by this age, your teens are wise enough to differentiate between wrong and right. But it would be best if you, as parents, still guided them by not disturbing their freedom.
Why do you need to encourage a kid to save money?
It is often said that saving money is such a habit that it can take time to build and implement practically in our day-to-day life. Hence, it is never too early to introduce your kid to the concept of money saving and some good saving techniques.
Here are some points that let you know about the good side of saving money from an earlier age:
- Learning about the importance of money from an earlier age can make your kids think twice while spending in the future, which is good. Spending on unnecessary things means wasting money and makes no sense at all.
- They tend to be more practical and serious about life, which helps them become wise and good-decision makers in the future.
- Seeing parents working hard to earn money to save some of it and knowing the importance of money motivates your kids to work hard from an earlier age, whether it is for a scholar in childhood or for fulfilling their desired set of goals in the future.
Everything has its boon and bane, so does it. There can be many good sides to saving money from an earlier age, but there are also some harmful impacts.
Here are some points about the bad side of saving money from an earlier age:
- You give them allowance whenever they do household chores, thinking it might help them understand what saving money means, but your children might understand it in other ways. They think of it as a reward and often make a money deal whenever you ask them to do some work(household work) in the future.
- Making them understand the importance of money and encouraging them to save money is acceptable to some extent. But if you keep reminding your kids about the importance and why we need to make a habit of saving it time and again, then your kids might think that money is everything, and a money-minded personality emerges.
To cut a long way short, encouraging your child to save money from an earlier age is one wise decision as parents because saving money is a habit that takes time to build and implement practically in life. So, making your kids familiar with it since their childhood not only makes them wise and good decision-makers but also helps to know your kids about the meaning of hard work.