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How to inculcate a habit of saving in children

RBL Bank Nov 26, 2019

Saving is a habit and imbibing it in children at an early age is crucial for financial discipline in their later years. Parents play a crucial role in inculcating this essential habit in their kids. This article focuses on some key aspects of instilling saving habit in children.

Allow children to earn their wishes

It’s common for parents to fulfill most wishes of their children. However, for children to learn the nuances of saving, it’s important for you, as a parent, to allow your child to earn his/her wish. For example, if your kid demands an expensive toy, instead of giving in to the demand instantly, you can ask your child to save his/her pocket money to buy it. Children often receive monetary gifts from family members and relatives on various occasions.

Give your child a piggy bank asking him/her to put all such money received in it. It’s better to have a transparent piggy bank whereby your child can see his/her money grow when saved and vice-versa. You can also ask your child to do small chores, on successful completion of which you can reward them.

Open a bank account on your child’s behalf

Apart from a piggy bank, you can open a bank account on your child’s behalf and teach him/her basic banking operations such as making deposits, withdrawals, updating passbook, etc. Ask your child to closely look into the entries of the passbook and see how money has grown when saved. Acquainting children with banking operations at an early age allow them to grasp concepts of cash inflow and outflows, essential for financial discipline.

Note that as per RBI’s mandate, a natural guardian or a guardian appointed by court can open an under-guardian account with their minor child. Also, children above 10 years of age can operate the account on their own. If a debit card is given, you can cap its limit to stem frivolous spending.

Tell them to track their expenses

To help your child better understand the concepts of saving, ask him/her to track the monthly expenses. Give a diary where your child can note down all the expenses incurred in a month. Alternatively, with most children having smartphones, you can ask your child to maintain a spreadsheet noting down the expenses.

Ask your child to do a comparative study to know where he/she has gone overboard in a month and areas where saving can be done. Today, there are various money apps that teach children valuable money management lessons.

Impart knowledge regarding various saving instruments

Finally, you can impart knowledge about the availability of various saving instruments to your child. Familiarise them with common saving instruments such as a recurring deposit, fixed deposit, etc. and explain how these help in achieving various life goals. Once children are aware of these instruments, they can use them later for addressing various needs.

Saving is the cornerstone of wealth creation. Children knowing the basics of saving at an early age are generally more prudent with money in the later years of life. They stem binge spending, better utilise their money and are more disciplined with their investment habit.

Disclaimer: Articles published on the website are merely indicative and suggestive in nature and do not amount to solicitation. The contents do not guarantee the desired returns and/or results. Reader is advised to exercise discretion and consult independent advisors for achieving desired result. Visitors to this blog/ website w.r.t products & services offered by RBL Bank Limited herein, shall ensure that the comments / feedback posted shall be restricted to the contents published herein and shall not contain such language that may be un-parliamentary or against any religion, caste, section of society, political view etc. While our endeavor is to publish the comments that are submitted, however, all comments/feedback shall be subject to internal review by RBL Bank Limited. We do not guarantee that the comments that are submitted will be published.

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