Save. Grow. Invest.

Tue October 21, 2014

Contributed by the Bank of St Vincent and the Grenadines in support of Financial Information Month

Fostering the habit of saving early in childhood is necessary to start your child’s journey in financial education. Even two-year-olds can be taught how to put money into a money box (e.g. a piggy bank or any container for saving money).{{more}} Although they may not grasp the concept of savings, the introduction of coins and notes and putting them into a money box teaches them basics about money identification and differences between the different denominations.

The savings pattern and the time period allocated for a savings goal should be tailored to the age and maturity of the child. The younger the child is, the shorter his or her attention span will be. Therefore, if the child intends to save enough money to purchase a certain item, the item should be attainable within a short period of time in order to prevent the child from feeling that saving is a hopeless, endless endeavor.

On the other hand, if the child were older, the saving pattern could be extended by turning the savings goal into something unattainable within a short period of time. Encouraging children to save for a few months before they can purchase a favourite toy can teach them the virtues of patience and deferred gratification.

Furthermore, saving habits can be inculcated more effectively if children can witness and observe the actual accumulation of their savings efforts. Some parents use a clear jar rather than a money box, as a young child may feel that the money is “gone” if they cannot see it. Visual representations are important for children and putting a picture of the item they are saving for in their “bank” reinforces their motivation to save.

Another method of encouraging your child includes matching his or her savings amounts. So, if your child saves 50 cents a day, you can encourage him or her by also contributing 50 cents to his or her savings or simply open a bank account where interest is paid on whatever is saved. Besides serving as a reward for the child’s efforts, it can also help reinforce the saving habit and spur him or her on to save for future financial goals.

As the child becomes more proficient in saving in one jar or money box, parents may introduce more sophisticated concepts through other ways of saving. The practice of “save some, invest some, share some and spend some” provides children with opportunities to develop good money habits, while teaching them to look beyond their own needs and care for the less fortunate.

The celebration of saving is the ability to spend. Making children understand that whatever you spend must be supported by what you save is a great way of teaching them how to live within their means. When your children ask for something in the store, explain to them that you will have to pay for it and that it is not free. Suggest that they utilize the savings in their money boxes if they truly want the item. For younger children who may need more visual representations of the concept, you should also allow them to see the money, hold it, pay for the item at the checkout counter, and receive the receipt along with the item.

With older children, the concept of “needs versus wants” should also be introduced in tandem with learning how to spend only what you save.

Teaching children about money management habits is not merely telling them what you want them to do. Children learn through experience. Encouraging them to save through their money boxes or allowing them to handle their own money during “field trips” has a more lasting impact. Hence, always seize real-life opportunities to teach your children the benefits of good money management. Exposure to formal savings habits will broaden youths’ understanding of financial services, develop positive behavioural cognition, and help kids to acquire better access to education and health care in the future.