When people learn to save money at a young age, there are many benefits. Some of these benefits can be useful throughout their entire lives. Schools teach children very little about money which is surprising as it is integral to everything we do in the modern world.
Whether it’s paying rent, buying food or planning retirement the earlier you can learn how to save money the better your future will be.
But to be honest, the younger you are the more boring saving money seems, right?
When ‘adults’ start explaining things like pensions and mortgages you response is probably – Money is meant to be spent, what if I die tomorrow.
Well, bad news, modern medicine means you probably won’t die tomorrow so building yourself a nice pot of money could be quite helpful.
Put simply, the biggest benefits of saving money from a young age are security and freedom. Plus there’s much more we can all learn along the way. Here are 8 benefits to saving money at a young age:
Learning Why Saving Is Better Than Spending
When children see something they like in a store, they automatically want it. Some people never outgrow this habit. When children learn to save, though, they are more likely to resist impulse-spending as they grow older.
Even a young child can quickly see if they spend the only dollar they have, nothing will be left. They may be tempted to ask Mom or Dad for money when they want something else. If parents inform children that borrowing is unacceptable, they will start to understand that money in their piggy bank is preferable to an empty bank. Impulse spending can be reduced at a young age.
Learning Money-Management Skills
Children can learn to balance saving and spending. They can be taught to decide if something they want is really worth it. They learn the difference between spending on something trivial and spending on something that has long-term benefits.
At a young age, children can become smart shoppers. They can decide they do not really need an item that looks good at the moment. While this can also reduce impulse spending, it helps children become financially responsible.
Saving Money Means More Money
When children are old enough to understand banking, there are benefits to children having their own bank accounts. One example is teaching them about interest. The longer they leave their money in the savings account, the more money they will earn.
The earlier people can learn about the benefits of compound interest the more secure their future will be. Personally, the power of compound interest was only made clear to me in my late twenties. While this is earlier than some, it is something I wish I had known about 10 years earlier. It would mean I’d be far closer to owning my own home or even enabling me to retire YEARS earlier in the future.
Learning About Goals
Adults who never learned to save often find they cannot afford something they need. When children learn to save, this problem can be avoided.
Kids can be taught to save up for items that are important to them. For a younger child it could be an expensive video game, or for an older child it could be a car. When they see their savings grow, they will know they are moving closer and closer to their goals. When they have saved enough money for the game or the car, they will be proud of their accomplishments. Not only will they have the item they want, they will know they purchased it themselves.
Using money to teach children about goal setting is beneficial to both understanding how to save and add a valuable life lesson in general. Nothing worth having comes easy in life but it comes a little easier if you set yourself achievable goals along the journey.
Learning Self-Reliance
Many of these benefits also help children become self-reliant. When they know money belongs to them, they will learn the value of a dollar. They can start to learn budgeting skills that will be helpful throughout their lives.
For example, always relying on parents for money means children may not learn to become independent. Not only does saving money allow them to budget and buy things without asking parents but it also creates freedom. Teenagers especially can benefit from this by being able to go out with friends, take trains and busses, or simply buy their own food. One thing my mother did when I was around 13 was to give me a clothing budget each month. It allowed me the independence to shop for myself without relying on her. Of course, to start with I blew the whole lot straight away but I quickly learnt that I needed to save my money in order to buy more expensive items like jackets or shoes.
Learning How To Earn
From teens with jobs to youngsters with chores, kids can learn that earning money is the best way to acquire it. This, in turn, can help them develop a good work ethic. Instead of thinking all they need to do is go to a parent or a grandparent for money, they will learn how to earn it themselves.
When kids of all ages earn money, they develop a sense of pride in themselves. Whether they spend an afternoon mowing a neighbor’s lawn, or work at a fast-food place after school, they learn the relationship between work and money. They will be less likely to take on the belief that everything they want should be given to them.
Learning About Sources Of Money
For most kids, work is not the only way they obtain money. Children are often given cash as gifts for birthdays and holidays. They receive money for special occasions, such as graduations. They may also receive cash prizes for various types of competitions.
Whenever a child receives money, it is an opportunity to learn decision-making skills. While he may not put it all in the bank, he can learn to allot a certain percentage for savings.
Parents Can Teach The Benefits Of Saving Money
A child of any age cannot learn good habits and skills overnight. Parents need to be patient and consistent when teaching children about saving. Although it may be a little more difficult for older kids who have spent freely throughout their childhoods, it is never too late to teach and learn.
One habit some parents must overcome is the belief that financial topics are for grown-ups, and should not be discussed with children. It is much better for kids to see parents do their monthly budgeting and paying bills. Encourage your kids to ask questions, and take time to provide the answers.
Even young children can be taught to handle money effectively. An easy way to start is to teach kids to save a specific percentage of all money they receive. You can give them attractive piggy banks for this purpose. Praise your child whenever he puts money into the piggy. Let him know when it is full, you will open a savings account in his name.
Make sure to follow through with this offer. Each time monthly statements come in, show them to your child. Between interest and adding money to the account, he will be excited to watch his savings grow.
Grandparents, aunts, and uncles who give money to your child can be helpful, too. They can gently remind your child to put some money in his piggy bank whenever they give him cash gifts.
You can also set a good example for your child. Whether you shop online or in local stores, it can be a good experience. Your child can listen and watch as you compare prices. He can learn when you decide to not buy an item because it is either too expensive or unnecessary.
Some parents still believe children do not have to learn about money because they provide everything their children need. While this approach can cause difficulties in childhood, the kids are at a disadvantage when they grow up. Without financial skills, they can become impulse-spenders. They may even have trouble covering basic necessities. When they have families of their own to support, and when they reach retirement age, they may have serious financial problems.
It is much better for children to learn the benefits of saving money at a young age. They will be proud of themselves, and they will be financially secure when they are older.