From saving to thoughtful spending, to budgeting and living within the means, these are the basic financial skills that one should learn even at a young age. Yes, kids need to learn these, too, not only to help them have a secure future but to also give them the confidence to deal with and understand financial problems.
If children stay ignorant about money and do not learn these skills, then it is more likely that they will grow up to suffer from money problems, if not major debt and poverty.
As parents, you can help secure your child’s future by teaching them the basics and the importance of budgeting and saving.
Budget basics
When your kids are old enough to receive an allowance, then it’s time to teach them about budgeting.
Proper and effective budgeting requires that the child knows the difference between needs and wants, and your goal is to instill in your child the mindset of spending on needs as the priority over wants.
Sit down with your child and plot their budget allowance together based on these. If your child manages to stick to the budget, then a reward would be a good idea. Keep going until budgeting becomes a habit.
There are more detailed online resources and even mobile applications for teaching kids age-appropriate budgeting and even a sample 52-week budget and savings challenge.
Planning and goals for savings
As your child learns to budget, he or she also needs to learn what savings are for. This means discussing future financial goals and explaining the importance of savings for emergencies and important future expenses. No matter what it is, what’s crucial is their understanding and appreciation for the value of savings.
A toddler might start the habit of saving by using a piggy bank. An older child, say starting at seven years old, might be able to appreciate and benefit more from an actual savings account in a bank.
BDO, for example, has a Junior Savers Account especially designed for children ages 0-12. It’s as simple as opening any savings account at a bank branch with an affordable initial deposit and maintaining balance.
Additionally, you can also set up a Junior Savers Plan that can help your kids grow their savings. This is an automated service that deposits cash from your BDO Online Banking account to your child’s Junior Savers Account. You may set a regular schedule for the transfers as well as a fixed amount —all done conveniently online.
You and your child can monitor and track how their savings account is growing. Discuss how budgeting the allowance and maintaining the savings account work together in achieving the financial goals you’ve set.
Budgeting and saving are essential skills that you and your child can practice together—as a means to develop bonding and trust, and as a way to secure your child’s future.