Five tips to teach your child about saving money

The current generation of children faces exceptional financial challenges. High university fees, rising house prices and stagnant wages mean that preparing a child for her or his financial future requires ever more thought and planning.

Yet equipping a child for their financial future need not be daunting. Much of it comes down to the lessons a child learns, and the small steps parents take to put some money aside while their children are young.

Irrespective of whether a child is taught about money, they will always develop financial habits – and some are more helpful than others. But if parents and schools step in early to give children confidence in handling money well, that child can go into adult life prepared to make sound financial decisions.

1. Need vs Want: One of the first and most important lessons to teach your child is the difference between a wish and a necessity. Explain that needs include the basics, such as food, housing, and clothing, and wants are all the extras. You can use your own budget as an example to illustrate how wants should take a second place to needs in terms of spending
2. Set savings goals: Helping children define a savings goal can be a better way to get them motivated.
3. Have them track their spending: If your children get pocket money allowance, advise them to write down their purchases every day. This will encourage them to think about how they’re spending and how much faster they could reach their savings goal if they were to change their spending patterns.
4. Offer savings incentives: If you’re having trouble motivating your kids to save, you can use “matching contribution” principle to ramp up their efforts. For example, if your child has set a big savings goal, say a 4,000 RMB tablet, you could offer to match a percentage of what he or she saves 50/50. Alternately, you could offer a reward when your kid reaches a savings milestone, such as a 500 RMB bonus for hitting the halfway mark.
5. Set a good example: If you want your children to become savers, being one yourself can help. Parents and grandparents can also help their children by putting money aside – even the smallest amounts can make a big difference, especially if they start investing when children are young. Finding the right tax-efficient vehicles could, of course, help maximise what you save for your children.

Anyone feeling daunted by the prospect of preparing their children financially for adult life should remember that investing is a medium to long term commitment. As your children grow up, so, too, their financial acumen and assets could be growing with them. It need not be rocket science.

However you want to invest, you need to choose a simple, flexible way that gives you every chance of success in providing for your child’s future.

At St. James’s Place, we have a range of financial solutions to help you invest on behalf of your loved ones. You can choose from a comprehensive range of funds available through different investment plans. You can invest regular amounts each month or invest lump sums whenever you wish.

About St. James’s Place Wealth Management

At St. James’s Place Wealth Management, we offer personalised advice on financial, investment and tax planning, designed specifically for expats’ lifestyle goals and stages of life. The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

Visit our website to find out more: www.sjp.asia

Please note that due to local legislation we are unable to offer our financial planning services to nationals of the People’s Republic of China.