How to incentivize savings for children

Savings is an important lesson to be taught to kids. One of the most important lessons a parent can give to kids is the lesson to be financially responsible and teach them about savings. The topic is so important that April 22 has been declared as, “Teaching Children to Save Day”.

Teaching kids however, can be tricky. They are young and impatient. The concepts need to be introduced in a way that makes it interesting for them. In short, we need to meet their needs through the concept of savings. Here are a few ways how we can do this:

Introduce them to the concept of a Piggy Bank-

Piggy banks or any common jar is helpful for this matter. Teach them that they can start saving up for a toy or a game they want. Tell them to keep a part of their weekly allowance as a part of their savings. Say if they get 100 rupees, teach them to keep 20 rupees in the piggy bank. Or any small amount for that matter. Teach them that no amount is too small and that it adds up to a large amount. That way in a month or two, they will have a good sum of money. This way they can pay for what they want to buy through their savings. Even if it is not the full amount, encourage them and incentivise through the promise to meet them halfway.

Telling them that they can pay for gifts through savings-

Festivals and birthdays are very common. Kids often are invited to their friends birthdays or are given gifts on special occasions like birthdays. Teach them that they can save up money to buy gifts for their own friends. Explain to them how saving little by little means they can buy their little sister or brother a gift on Diwali. Inculcate the joy of being the gift giver in them. They will follow suit with savings and a lifetime lesson. The amount of joy they will receive from giving their best friend or sibling a gift bought by their own money is immeasurable.

More saving through a timeline-

Teach them to save big within a smaller time frame. Introduce the concept of time and savings through simple mathematics. Explain to them how they can save more in the same time frame and end up with a bigger amount. Incentivise this by introducing an awarding system. The bigger the amount they save, the bigger the reward. This encourages them to save more to get more and simultaneously also teaches them about how investments work. The bank reward system also awards big for higher investments. This incentive system gives them a head start to more advanced topics like investments down the line.

Show them the way through your example-

Being a parent means you can teach your children what you have learnt throughout your life and through your experience. Lead by example.Show them how you save and what that means or what it culminates into. Involve them and teach them real life examples of what savings can achieve in your everyday life. For example, statements such as, “I save this much so by the end of this year we can buy the new car that we have been talking about.” This helps them set goals and start saving for it. It bridges the gap between concept and execution, making them realise that savings is their solution to some of the bigger wants in life.

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