Saving and saving money is one of the most important and useful skills in life.
Learning how to manage money, like learning a foreign language, is easier from a young age and leads to a habit that will pay dividends in the future. It is the parents who play an important role in teaching their children how to manage money, which in turn will contribute to their financial stability throughout their lives.
“These days, teaching children how to manage money is different than it used to be – cash is used less and less and online purchases are becoming more common. However, I would encourage parents to talk to their children about financial planning and also that there may be a time in the family when money needs to be used more frugally. This way, children can see how the family actually handles money. To encourage positive changes in money management, parents can create a healthy awareness of responsible money management while children are still young. With small, everyday steps, you can enable your child to plan their own purchases and help them save or even earn money to buy the things they want,” emphasizes Kerli Gabrilovica, Director of Luminor Latvia.
There are various resources for teachers to teach financial literacy to school children, but so far it is not a separate subject. Therefore, it is up to parents to lay the most important foundation for money management, starting at a young age. First, by playing in the store and teaching them how to count money, and second, by getting them involved in saving and planning the family budget. Luminor has summarized five recommendations for how parents can help their children acquire basic money skills from a young age.
1) Save money to buy a coveted item or toy.
Aside from everyday expenses, we all want to buy something bigger and save money to do so. Saving money is not easy at any age, so it pays to learn it as a child and make it a habit. If your child wants a new toy, you can work with them to create a realistic plan to save for it. For example, setting aside a certain amount of your allowance each week or getting paid to do certain chores.
2) create a budget for expenses
A regular allowance is a great way to teach your child the value of money and how to save. Even if the child spends the money very quickly and fails to put it aside for a planned major purchase, this is also a lesson – next week or next month he will be more careful. You can also keep a spending and income diary with your child, recording all of their expenses. At the end of the month, you can discuss these entries together to see how you can still save for the things you want.
Meanwhile, there are several mobile apps that can help your child learn basic budgeting skills and get into the habit of saving. FamZoo, for example, is an app that lets you keep track of errands, income, etc. Another simple app is Bankaroo, which is like the first virtual bank for kids and teaches them how to save for specific goals and plan a budget. PiggyBot is a virtual piggy bank that lets the child keep track of his expenses and savings.
3) encourage independent saving
Children are often naturally imaginative and entrepreneurial, and this can and should be encouraged. Parents can encourage their child to find their own ways to earn money. For example, in the summer, you can sell wild berries (parents can help by arranging with neighbors who are willing to buy them), participate in fairs by selling their crafts, mow the neighbor’s lawn, or walk their dog. It is important that parents allow the child to organize and direct his or her own work, providing support or guidance only as needed.
4) Doing your own shopping
Children really like it when they are given a responsible task. For example, to buy bread at the store or pay for their own ice cream. They must first figure out how much money they have and what they can buy, then pay at the cash register and get the change from the clerk. For younger children, it is a good idea to rehearse this situation at home – play in an imaginary store so that you are not confused the first time you are in a real store.
5) set a good example
Parents should ask themselves if they are able to create and stick to long-term savings and investment plans so they can be a good role model for their children. The most important thing is to talk about all of these issues. All family members benefit from setting financial goals together, sticking to them, and trying to achieve them as a family. For example, the family budget can be discussed together each month – how successful each family member has been in saving and what they can do together to make the plan even better for the next month.