Saving money is easier said than done. Developing the habit of saving is difficult, especially when you have little money left after spending on daily needs and paying bills. It’s even harder if you have children because you need to save not just for yourself but for them too.
If you want to place them on the right path to financial freedom, teach your kids how to save. Help them along the way with these few ideas on how to save. Over time, they will learn to build a financial cushion in the future.
1.Teach Them Early
Teach your children early about the value of money as well as the time value of money. Let them know when you’re saving money for them. Don’t worry if the amount is small. The message is that money will grow, but it would take time.
For example, if you set aside RM275 monthly from the date of birth, the savings would grow to RM82,500. The growth doesn’t even include the magic of compounding interest or earnings.
Whether the money you save for them is in regular savings or fixed deposit account and 1Malaysia Education Savings Scheme (SSP1M) account, explain how the funds for future use grows in each account.
2. Teach Them to Earn
Tell your children that money doesn’t grow on trees. People work to make money. They can have first-hand experience at home by doing some household chores. By doing simple work like cleaning the room or watering the plants, you can reward them with a small sum of money.
You are cultivating your kids to be industrious when you offer a little incentive for a job well done. They can add the cash from doing work to their savings from school allowance. However, don’t overdo it until it becomes a habit for them to request incentives each time they complete a job.
3. Teach Them to Spend Properly
Aside from saving and earning, teach your children the proper way of spending money. If your child wants to buy something, encourage them to save for it. They should know that money is a resource that diminishes when you use it.
When your children see their savings deplete after every withdrawal, they will learn money management and do careful planning before making another purchase.
Also, it would help to teach them how to economize at home. Set an example by turning off lights when not needed or conserving water. Let them know that every cut back in utility bills is an opportunity to save more money.
4. Teach Them about Borrowing
In case your child is short on money to buy a special item, lend them on the condition they repay it within a specific period. This is an excellent time to introduce the concept of borrowing and the importance of paying back money owed from a lender.
Explain that if the borrower is unable to pay back the loan, the consequences are penalties or forfeiture of the privilege to borrow. Also, you can already explain there has to be a definite purpose for borrowing. Children should learn to tell the difference between good and bad debt.
5. Teach them about investments
Children should be taught that idle cash will not grow unless you allow it to grow. Tell them about the need to invest money to build a nest egg. Investments can be in the form of stocks, bonds, or insurance, and hard assets like real estate property.
Insurance, for example, it is forced savings because premium payments need to be updated in order to keep the policy effective. Likewise, investing in real estate in Malaysia is one of the best options since property values appreciate over time.
Building the Foundation
By teaching your children the correct ways of saving money is actually preparing them to be good money managers and financially responsible individuals. Lucky are the children whose parents have the time to teach them the importance of money during their growing years.
We hope that you can practice these tips and tricks with your children so that they can understand the importance of personal finance in the future. The learnings will carry over when they become adults and enter the mainstream in Malaysia.
If you do have other useful tips or ways, do share with us in the comments section down below or on our social media platforms. This article is brought to you by Direct Lending, an online personal lending platform that offers – Simple, Easy and Safe Financing. Follow us on our blog for more useful tips on personal finance.