22nd April is Teach Your Child to Save Day, part of National Financial Literacy Month in the US. It serves as a reminder to parents regarding the importance of encouraging healthy financial habits in children from a young age.
Saving is the most important financial habit of all, yet it is something that many adults have never learnt to do. Hence why, according to research from the Federal Reserve in the US, 4 out of 10 Americans couldn’t afford a $400 emergency and 22% say they expect to forgo payments on some of their bills.
When you are an adult, saving is not only important to provide a buffer against life’s unexpected turns but also to ensure that you can live a comfortable life both while you are working and once you retire.
In order to achieve that, by the time they become young adults, your children should understand some key concepts and truths about financial planning. As a parent, you can gently lead them towards an understanding of these throughout their childhood.
Here are some top tips on ways to teach your child to save:
1. Wants versus needs
Parents the world over will be familiar with the refrain ‘I need these sweets/ this Lego set/ a new smartphone’ (select the most appropriate option according to age of child). These heartfelt pleas offer an opportunity to explain to your children the difference between essentials (a roof over your head/food/healthcare) and nice-to-haves.
2. Set savings targets
When there is something that they really want, sit down and work out a savings plan with them to be able to attain it by saving their pocket money or allowance or by helping with household chores. To incentivise them you might offer to pay half if they can save the other half. This will teach them the value of setting savings goals and the pleasure of achieving them.
3. Foster an appreciation of working to afford treats
Establishing a link between ‘working’ and being able to afford life’s niceties sets a great precedent to take your children through life appreciating the value of money. Being able to delay gratification is a skill sorely lacking in many adults today and the reason why many people get mired in a cycle of debt.
4. Stress the importance of prioritising saving
Where many adults come unstuck is that they spend before saving rather than the other way round. Good saving intentions are meaningless if by the end of the month there is nothing left to set aside. Every time you give your child money, encourage them to save a part of it and keep the rest to spend as they choose. Squirrel the savings part away in a deposit account or jar for smaller kids so they can see their bank balance going up. If they can continue this habit when they gain independence and start to earn their own money, they will be on track for a secure financial future. Furthermore, act as the bank and deposit your own interest rate into these accounts or jars to reward the positive behaviour of saving.
5. Explain compound interest
Teenagers should be taught the principal of compound interest as a matter of course. Every kid I know loves getting something for free and the idea of free money – compound interest is interest on interest! – will intrigue them. Grasping this concept early will motivate them to save from the minute they start earning. Perhaps even more importantly, flipping it to teach them how compound interest on debt can lead to purchases costing them many times the actual price of the item could be pivotal in persuading them to live within their means and avoid credit cards and other forms of unsecured debt.
Saving might seem boring to kids, so engage your imagination and engineer fun lessons that will resonate with them. Teaching your kids to embrace and build financial stability in their lives, even from an early age could well be one of the best lessons they ever learn. This stability will spill over into other areas of their lives and allow these areas to flourish.
If you can get your child to appreciate that early in life, you will have done a fantastic job!

Financial Consultant
I work as a Financial Planner with expat clients to meet their financial planning needs and goals, with a focus on adequately protecting expats & their families, and helping people to grow their savings over the long term. I strongly believe in building meaningful and lasting relationships with clients to ensure the best client outcomes are achieved.