The following was submitted by a guest contributor…
Most parents realize that it is important to teach their children about saving but not many follow through. In 2012, about 63% of American parents said in a survey that their children had a savings account, but only 43% of these parents would review the monthly bank statements with their kids. Our hectic daily lives take the blame, but the fact of the matter is the more time you spend teaching your kids about saving money, the more time they have to grasp the concept.
Shop around with your kids for the bank that offers the best interest rates. You can start online at home on the Moneysupermarket website. It displays all the different banks and their rates, as well as reviews about their products.
Kids Can Start Saving As Early as Pre-school
There is nothing wrong with starting to teach your kids about money from as early as two years of age. As soon as children can identify things around them and pronounce words, they can know what money is.
From age four, it is a good idea to get a piggy bank for your kid. Your child will now be able to identify the different bills and the value they represent. A fun way to teach them about the value of money is to role-play buying and selling with them.
Let them have the small change on your trip back from the grocer to start filling the piggy bank. Instead of just giving your kids everything their hearts desire, have them save up for a very coveted toy and encourage them to save any birthday money they get. If you have a printout of the toy, have them tape it to the piggy bank to remind them of their goal.
Encourage Your Kids to Save Their Allowance
During the early elementary years, you can start giving your kids a monthly allowance, with the responsibility that comes with it. A couple of dollars are more than enough to start with.
Teach your kids how to save a portion of the allowance by dividing it into different purposes with one for saving, one for giving and even one for investing. Let them pay for their own entertainment or collectibles.
You should also open up a bank account for your kids during this period of their lives. Be sure,however, that you explain to them carefully how it all works. Explain to them the benefits of a real bank over a piggy bank. “In a real bank you get interest, as the bank is actually lending money from you, a privilege they have to pay for.”
Safety is another issue. A piggy bank can be stolen easily, while money in the real bank is usually quite safe unless the bank collapses.
Teach your children how to compare interest rates and how to monitor the interest monthly. A bank account is also an opportunity to teach your kids about taxes. If they earn more than a certain amount per year, the interest on their savings will be taxed.
Explain to them how it works and that it is a good idea to save up from a young age, as children play less tax than adults. A good way to encourage your kids to keep saving is to reward them by matching their savings as soon as they have reached a certain pre-set goal. You can now let them spend a portion of that money and enjoy the fruit of their savings.