As parents, we want to encourage our kids to save while they’re still young. We’ve known the earlier we start to save, the more money we can accumulate and grow for the next couple of years thanks to the power of compounding interest.
But with our kids’ high monthly allowance, back-to-back shopping spree, and the temptation of carrying cash around, encouraging them to save money can be challenging. How can you encourage them to develop the habit of saving? The financial advisers recommend creating a digital allowance for them.
According to the allowance tracker app RoosterMoney, most kids aging from 4-14 years old receive an average of $454 allowance as of 2017, in addition to the cash gifts they receive from their birthdays or holidays. Average kids can receive a take-home allowance of around $8.74 per week.
Giving an allowance to your children is one way of teaching them how to budget and save their money.
However, according to RoosterMoney’s CEO William Carmichael, parents are having a hard time nowadays explaining the importance of saving money to their children using traditional piggy banks or cash, especially since the new generation is living in the digital and cashless economy now. Instead of teaching them the traditional way, Carmichael encourages teaching your children how to save through digital means instead.
Practice Digital Monitoring and Tracking
According to Paul Golden at National Endowment for Financial Education, it can be difficult for a kid to understand the importance of saving when they see their parents swiping their credit cards whenever they go to stores. Since most kids look up to their parents and follow their footsteps, you as a parent should be the one to lead an example. Golden says you can teach your kids how to go to ATM or swipe a credit card when they need money to buy necessities, then teach them how to keep the receipts to audit their spending activities.
Digital money tracking apps help parents and kids monitor their cash flow as well as their spending activities.
Then, you can teach your kids to input these on digital currency tracking apps to help them monitor their money. You can also use the FamZoo app to send a text reminder message to your kids before they purchased something.
If you want a stricter method to discipline your kids’ spending, you can also download Parents app according to Golden. This app requires kids to get permission from their parents before they can use their money to buy something.
According to Golden, you can also encourage our kids to save by rewarding them for saving, and it can be traditional, modern, or a combination of both methods. For example, you can reward your kid for saving by giving them extra cash, granting their wishlist, or buying the stuff they’ve been waiting for. Aside from that, digital currency apps like RoosterMoney also gives a default interest rate of 9% based on the money they saved.
As a parent, you also need to understand your kid’s financial personality to determine what lessons you need to reinforce to improve their financial literacy.
Your kids will be surprised to see how much their money can grow, thus, encouraging them to save further. Moreover, make sure to tell your kids how they won’t get those big interest rates on their money if they deposit it in the banks. At least your children will have something to look forward to. You can set the notification in your FamZoo app to notify your kids whenever they get their returns.
Teach Them To Be Responsible Debtors
According to Golden, you should also teach your children how to be responsible when they have debts. As much as possible, do not pay their debts (unless necessary) and practice the habit of asking for payments (and vice versa).
This will help your children realize the importance of money and how debts should be paid. Debts are financial burdens we need to repay, after all. This will also help your children pause for a while and think twice before availing of a debt. Golden adds being a responsible debtor also helps children minimize impulsive buying as they realign their financial goals and priorities. It will also help them identify their needs and wants.
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