How to teach your children to save money

MANILA, Philippines — It is never too early to teach your children how to save money. It is, after all, a virtue that is built over time.

If you start too late, you might have problems trying to undo some spending habits that they might have already acquired, and the problem will magnify as they grow older. If you are able to instill the concept of saving in them, when they become adults, they will be able to manage their finances effortlessly and consistently, and their savings shall be sizable enough to tide them over challenging times.

In a statement sent to Philstar.com, financial literacy advocate and EastWest senior vice president and head of regional branch banking Ivy Uy stressed the importance of managing money efficiently starting at an early age.

“We need to take what we know now and teach it to the next generation, and this includes how to be money smart. We can start by teaching our kids how to save money—establish the mindset of saving for the future and develop that habit in them,” said Uy.

 According to Uy, here are some ways to introduce the concept of saving to children:

1. Explain the difference between needs and wants. Create a chart with two columns, one for needs and one for wants. Needs, or necessities, include food, clothes, shelter, health care and education. Wants include cell phone and other gadgets, expensive toys, luxurious clothes and shoes. “Advise your children that when it comes to spending, they should prioritize what they need over what they want and only consider buying what they want if they have the budget for it. Teach them one of the golden rules when it comes to spending: If you see something you like, ask yourself first if you truly need it,” suggested Uy.
2. Give them a reasonable allowance. Give them a regular allowance or pocket money. Do not make it an excessive amount. This way, they learn to manage their own money and will have a better idea on how to save money and spend wisely.
3. Help them set goals. Tell your kids that if there is something that they truly want, they will have to save up for it on their own, from their allowance. Help them establish a reasonable savings goal, such as saving how much money per week for how many months. Not only will they realize that they need to save to be able to buy what they want; they will also feel the satisfaction of finally getting it after arduously saving for it.
4. Give them the opportunity to earn their own money. You give them an allowance. This is automatic “income” for them that they can save and spend. Why not give them the opportunity to earn extra money by working for it? Doing extra house chores, for example, and being paid for it? This way, they will learn that if they want extra money, they need to work for it.
5. Practice what you preach. Kids are very observant, and what they see becomes gospel truth for them. If you ask them to save, then they should see that you’re saving, too, and not splurging on luxury goods.
6. Open a bank account for your children. Encourage them to save their extra money in a bank account and earn interest for it. Banks have savings account designed for kids, such as EastWest’s Kiddie Savings Account, which is an interest-earning Peso savings account for children 18 years old and below and comes with a passbook to allow kids to keep track of their savings easily. Kiddie savings accounts only require a small amount to open an account, P2,000 in EastWest’s case, and earn interest at an annual rate of 0.125%.

“There are so many benefits to teaching your children how to save and spend responsibly. They learn to be disciplined, goal-oriented, organized, hardworking, and independent. With these strong values in place, they will become ready to conquer the real world with financial security in their future,” Uy concluded.

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