Planning ahead: teaching your kids about saving for their future

Money falling out of a jar

Money isn’t the route to all happiness, but it can certainly take the pressure off everyday life. Teaching your children the importance of managing money and saving for the future is something every parent thinks about at some time or another. If you’re already planning for your retirement, the idea of squirrelling cash away may be firmly in your mind.

The beauty of savings is that the younger you start, the more control you have over that pot of cash. Ultimately, planning our finances wisely allows us to do the things we want to do in life, Whether that’s trips to a spa, embracing a new hobby, or going on day trips.

Essentially, managing money is a life skill and one that can be practised lifelong, even from a younger age. So, how do you teach your children the value of money to better set them up for a financially secure future?

The taboo subject of money

Research reveals that often, we copy our parents’ approach to handling money. And while we may feel comfortable instructing children on how to master other skills in life, money can feel like a taboo subject. But by being open and brushing up on our own money management skills, we can hand down worthy advice.

The confusion we may feel ourselves about working through our finances, or low self-esteem over our own ingrained habits can also contribute to a lack of honest dialogue between parent and child. The question is, how can you break this pattern, and empower your kids to feel confident about their money management skills?

Adopt the right approach

Starting early and tailoring your advice to the age of the child is the first, important step. Giving your child time to understand the value of money in terms they’ll understand is the key. There are a number of ways to do this, including:

  • Encouraging them to save for something they’d like: whether that’s a new toy, game or spending money for a trip away
  • Outlining how we buy things: providing actual examples of how much it would take for a parent to earn the money needed for a special gift is just one way of doing this.
  • Teach them to live within their means: for instance, if they need to borrow money from you to buy something, offer it as credit. You can set repayment terms based on what feels right for you.
  • Reinforce the value of learning from mistakes: rather than penalising for mistakes made, allow them to learn from the consequences. As long as the amounts aren’t unmanageable for them.

At the end of the day, it’s worth remembering that children do pick up money habits from their parents. By setting a positive example of improving your own financial management and talking about money, you’ll be passing down valuable lessons day-to-day.

Thinking about savings

As well as talking about day-to-day finances, setting longer term saving goals is an important step. Rather like saving for a new game or toy, setting a tracking system up for long term savings will help your children to look further into the future.

To encourage saving, you could even match your children’s input pound for pound or provide them with an incentive when reaching a specific milestone. For example, once they’ve saved £100 you could add £50 to the pot.

Along with teaching your child the benefits and importance of saving for bigger goals, it can have a positive effect on your relationship. Improving communication, trust, and camaraderie.

What about your savings?

As we say, leading by example is one powerful way to demonstrate just how beneficial it is to be financially secure throughout your life. Showing your children how good it feels to have the money you need to live a fulfilled life and reduce money worries is also great for your own mental health and wellbeing. Not least, it allows you to focus on what will give you enjoyment.

If you’re heading towards, or already in, retirement, make sure to set up your own saving goals. Perhaps you want to travel. Talking through your planning process for your trip, including the money aspect, can be a positive learning experience for both you and your children.