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Six tips to develop good savings habits:

It's about what you do with the money you have that counts and good savings habits start with childhood.
By Jeremy Cabral
Date: March 13 2013
Editor Rating:

Motherpedia' exclusive survey of 1,000 mum’s in September last year identified “the economy and how it impacts on their capacity to give children the life they want them to have” as a key issue of concern.

At the risk of being the devil’s advocate, I disagree, and I’d like to explain why. Firstly, Australia’s economy is the envy of the world. We’re fortunate to be Australian and to be living here at this time.

But I think the real issue here for mum’s is that it’s not about what your children are given or what they earn, it’s about what you do with it. Plenty of people accrue vast riches and lose it all. If I spend more than I earn, I’ll struggle compared with someone who earns less but has a good savings habit. Far too much emphasis is placed on luck and not enough on our own actions. As financial advisor Noel Whittaker says - “It’s a matter of managing your money better.”

Aussie kids, born of privilege, have all been given the chance to thrive. It is the choices they make and behaviours they adopt that will determine how far they benefit from this advantage – and this is where parents are important role models.

Here are some tips to help you develop a good savings habit in your children.

1. Use a piggy bank:

Piggy banks are a cute accompaniment to any kid’s room. But it takes a keen strategy to turn it into more than a room toy. Here’s one way to use a piggy bank to start good financial habits in your child:

  • Use a marker or label maker to write a savings goal on the side of the piggy bank, say, $10.
  • It is even better if the target is specific, such as a particular toy.
  • Once the $10 of piggy bank cash has been reached, let your child take out the money to take to the shops and pay for the toy themselves.

2. Match their piggy bank savings:

Match their savings as an extra contribution to their savings account. Teach that saving is not only for material reward, but also long-term benefit.

3. Teach about the magic compound interest:

Starting young with a simple compounding interest account can lead to vast riches later in life. Noel Whittaker’s books are the best at teaching this and provide compelling examples that are incredibly motivating.

4. ‘Needs’ v ‘wants’:

Instead of saying “I can’t afford that,” another option is to say “We don’t need that” or “I’d rather save the money for our holiday or your birthday present.” Every purchase is a choice between many alternatives, not because Mummy is mean. Teaching your child the difference between needs and wants is a good way to frame everyday money choices.

5. Grasp at opportunity

Children need to learn it’s not what you earn, it’s what you do with it. Being successful in life is a question of good planning and management. In short, the opportunity is there for all Aussies to succeed, if they only realise it. Grasping opportunities most people don’t see is a recipe for success.

6. Life is pretty easy with money in the bank

As long as some savings are in the bank, life is fairly easy. If you raise a child who maintains a healthy savings balance, they will have an easier ride.

Raising kids to be active savers with positive financial habits is the best leg-up possible. You can’t control the economy but you can teach kids lifelong savings skills.

* * *

Jeremy Cabral is a personal finance publisher from a website which aims to help consumers make informed decisions.

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