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Teaching Children to Save
starting the saving habit early in life

For parents, saving any amount of money can be a lifelong battle, more so when children enter the equation. Initially, kids know nothing about values because everything is there for them - food, clothes and especially treats. When they pester in the supermarket for something that takes their fancy and are told - "No, it's too expensive: we can't afford it." - they only understand the first word, having heard it so often. Others like "expensive" and "afford" are just mysterious excuses grown-ups use for not giving them what they want. Later, in school, they are taught purchasing in simple ways: John has two dollars. If apples are twenty cents each and he buys five, how much money is he left with? A practical example like this is used to teach basic arithmetic which will be expanded on throughout their schooling. By the time they are old enough to start managing their own finances, you'd think they'd have figured out that 2-1=1, which is good; whereas, in terms of dollars, 1-2 leaves them out of pocket. Maybe this will be merely a temporary setback, as long as the lesson is learned; if not, as is often the case, living beyond their means becomes a habit that is very difficult to break. The better alternative is to start their financial education early so that they don't fall into the live-now-pay-later trap.

The practice of giving children pocket-money is commonplace. It does teach them value for money to a degree; but when their weekly allowance runs out and they can't con any more out of the gullible olds, they just rely on whatever the home provides until next pay day. At some point, particularly when a favourite candy bar suddenly costs more than it did before, they discover inflation. Here's where the story really starts. Failure to stay ahead of this fact of life pretty much ensures a dismal future playing catch-up; and one way to guard against it is to encourage the savings habit from an early age.

Bear in mind that they think in materialistic terms; so the accumulation of money on its own will seem both boring and not worth the effort. What it can buy, however, is something they understand very well; and this can be used to counter their annoying childhood logic. As an example, our son wanted a new pair of sneakers: not the affordable Kmart kind, but designer-label like his mates at school wore. "You really want them?" we asked. "Yes, I really do," he replied, with that sucked-them-in-again twinkle in his eye. "Okay," we said, "We'll put in the cost of the Kmart shoes - you come up with the rest." The twinkle was replaced by a scowl, but we refused to be manipulated. I suppose we did compromise in a way, offering him extra cash for doing chores around the place. In effect it was still our money; but he saved it, plus a good portion of his weekly allowance until he had enough; and because he had invested in them, those sneakers lasted much longer than any we had bought for him in the past.

An important lesson was learned; not just by our son, but also by his siblings. Suddenly they were queuing up for work to earn money; so we agreed and drew up a roster. Although it was costing us, the affect it had on their attitude to money was worth it. The next step was somewhat harder - convincing them not to spend every penny on "stuff", but to keep some in reserve. To this end, we had help from the school which ran a savings program for students. In the main, parents funded this, and the suggestion that the children might also like to put some of their pocket-money into the account was met with the usual moans and groans. The son, however, was still very proud of his new sneakers and doubtless extrapolated the rewards for becoming a bit of a miser, so he started contributing. Sibling rivalry being a greater motivator than any advice from adults, the challenge was on to see who could save the most. Perhaps the surprising outcome of this simple exercise was the youngest daughter's eagerness to join in the game. She was still at that magical age, for parents at least, when shoes were just shoes. Her incentive, believe it or not, was in the money itself - in its acquisition, the saving of it, and in the pleasure of watching it grow.

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