Tips for raising 'savvy savers'
As any parent will tell you, raising a child can be an expensive business. According to research published this year by the Centre of Economic and Business Research (CEBR) think-tank, the cost of raising a child to 21 is £230,000.
A key life skill to teach your children is how to save and budget for the things they want. This way you'll not only give them the skills and discipline they need for a more secure financial future, but you may also save yourself some money along the way.
See below for our top five tips:
Lead by example
The most effective way to teach your child any good habit is for them to see you doing it, and saving is no exception. If you’ve told them about all the positive benefits of saving, but you don’t do it yourself, it’s unlikely they will either.
There are a number of ways you can do this. When you deposit savings – whether you do it online, at the branch or by post – involve your child, explain to them what you are doing and why. If you are saving for something in particular, such as a holiday or Hajj for example, share your positive feelings with them about saving for something that you really, really want. Let your child hear you talk to your family and loved ones about money and saving – perhaps your pension for example – so they will realise that saving is something you do when you are an adult, too. For a more immediate visual cue, you could even start saving your small change in a jar. The amount is not so important as the fact that you are making saving a ‘normal’ thing to do.
Make a savings jar - or two
Depending on the age of your child, it can be hard to explain the point of saving. Spending is fun with immediate gratification, however, saving for something in the future is a harder concept to grasp. A good way to tackle this is to make a savings jar. All you need is a clean jar and a picture of something your child really wants, which you tape to the front. Then every time they put money in the jar, they will have a reminder of what they’re saving for. Set realistic targets though, because if your child picks a very expensive item, they may get tired of saving long before they reach their goal. Of course, it is also possible to make more than one jar – for example, if your child wants to put a few coins aside for charity, for example.
Make a savings chart
Another motivational activity is to make a savings chart. Once you know what your child is saving for, figure out how many weeks it will take and make a chart together. Allocate a box for every week and when your child successfully saves their money, they can put a star or a sticker on their chart. This is a really powerful way to show how they are getting ever closer to their goal.
Consider 'matching' their saving
Seeing savings grow is a great motivator, for children and adults alike. Therefore, if you can help your child by matching a portion of their savings or paying them a small financial reward when they reach their savings goal, they will be encouraged to stick to the savings habit. Another thing to consider is giving your child pocket money in return for specific chores, such as keeping their room tidy, helping to lay and clear the table or matching socks, for example. This will teach them a good lesson about being rewarded for work, even when they may not like the task.
For older children, it is possible to lay the foundations for future financial planning. Ask them to write out a list of things they want to spend their money on. This is very different to asking them to write a list of things they want, and you will be surprised how much effort they will put into the task. Once they have prioritised this list, ask them to put down the amount of income they are willing to save every week or month towards that goal. Their ‘income’ can include pocket money, and wages if they are old enough to work around school. It is possible to boost their savings by money they may receive for birthdays, or Eid. This financial planning will really focus your child’s mind and will serve them well in the future.
It’s never too early – or too late – to start savings. If you would like to talk to someone about Al Rayan Bank’s comprehensive range of Sharia compliant savings accounts, and how they can help you reach your savings goals, please call us 0800 408 6407