Kaylene Grant, Contributor

Grant

Teaching children to save and spend wisely usually involves some trial and error. What is important is that they develop good saving habits. Parents should always lead by example because if children see a lack of financial stability in the home, they will learn from this.

Lunch Money

Starting school usually marks the beginning of the journey towards becoming financially responsible. As soon as children are able to count money and easily differentiate notes and coins, they are ready to handle their own money. Distribute money weekly and increase this periodically as children grow older. Set and maintain a specifictime when the money is distributed. Being late could imply that it is acceptable to be tardy. If they finish the money before the designated time, offer them a loan and subtract the loan amount from their lunch money over a period. When lengthening the time period for distribution of funds, communicate this in advance and base it on their ability to exercise disciplined spending habits.

Ensure that the amount is sufficient for savings so that they develop the need to save. Encourage them to join savings club if offered at school and when the funds are paid out at the end of the year, give them a little treat and have them save or invest the balance with a reputable financial institution.

Set goals

Children should save towards specific, small and easily achievable goals. Create an incentive for them to save more by matching the amount they save. Give smaller children an appropriate container in which to put their savings in an easily visible area. If there is a need to borrow from children, pay them back - preferably with interest. Do not tell them that the money was originally yours; this does not encourage good saving habits.

Note habits

Teach budgeting by helping them to note their daily, weekly and monthly expenditure. Involve them in comparison shopping and explain how the household budget is run. Explain the differences between the more expensive and cheaper items.

Lead by example

Family finances should be discussed with children who may not realise how much thought, time and effort is put into planning the budget. Explain your budgeting process, stressing the differences between: necessities and wants, choices and trade-offs.

The goal of consistent saving is to achieve financial stability. Children will not get there immediately and sometimes it difficult to convince them to save when they always want immediate satisfaction. To help children form good saving habits for later years, teach them to practice delaying gratification.

Once youget the habit of saving, it is difficult to beat the thrill of seeing your money grow. Take children to the bank with you and ask which products and services would be best suited to both your needs. The bank is usually the best source of information about accounts and rates. Open their own account so they will enjoy economic prosperity in their later years.