It’s never too early to start teaching your child good, old-fashioned money sense. Lisa Templeton shares top tips for turning little spenders into little savers

Did you know that children as young as three can understand the concepts of spending and saving? Not only that, but by the age of seven, their money habits are formed, according to a 2013 study by the University of Cambridge for the UK’s Money Advice Service. And parents have the single biggest influence on their children’s money- management habits.

The trick is to start off early, set a good example, turn everyday financial transactions (visits to the bank, ATM and shops) into little lessons, and give your children the opportunities and the tools to handle their own money so they learn to be careful spenders and regular savers, investors and givers.

The most important lesson we can teach our children is that saving is fun. Saving brings opportunities and the ability to buy what you really want. It’s not about what you lose, but rather about what you gain.

Teaching our children to save is not enough unless we practise what we preach. Watch what you spend and talk about money to your kids in the car or at the shops. Tell them what you are saving for or recruit them to help you find the best bargains when you go to the supermarket.

Saving through the ages

Toddlers and tykes (age 3–8)

• Introduce your child to money as soon as they can count Draw lines around coins and cut out paper coins. Younger children love to set up make-believe shops, so let them play with their own paper coins and help them learn.

• Make saving visual Give your child two envelopes or jars, one for saving and one for spending or sharing. This way, they can see what they have. Every time they get money for doing a chore or as a birthday gift, divide it between the two.

It’s never too soon to start saving for something. If your child wants a new toy, put a picture of it on the savings envelope or jar and encourage them to save for it. Make sure it isn’t something unrealistically expensive: if the wait is too long, they may lose heart.

• Explain that you have to wait for what you want This is a tough one, but it is important for your children to learn it, and to carry it into adulthood.

• Every time your child contributes to their savings, add it up Let them know how much they still have to go. They will enjoy the importance of waiting and the incentive to save.

Tweenies (age 8–13)

• Open a bank account for your child Many banks offer savings accounts for children, with minimal charges. Whether they get pocket money, birthday money or earn it from chores, encourage your child to keep saving half their income in the bank.

• Allow your child to make mistakes Children need to learn that money is finite. It won’t be easy, but you have to let your child make poor decisions now, rather than later on. If they blow a good portion of their savings on junk and then remember they really wanted a bicycle or a new video game, they will have learnt a valuable lesson.

• Motivate your child to earn money by being entrepreneurial Let them earn some money by doing jobs around the house, or have a car-boot or garage sale and let them clear out their own goods to sell.

Teens (age 13–18)

• Introduce them to the concept of compound interest The sooner you start saving, the more your money can grow. Compound interest is interest on interest. In other words, the sooner you start saving and the longer you save for, the more interest you build up. Children should understand that money can make more money for them.

• Teach your child about trade-offs This is the age at which children want to buy things and are loath to save, so talk about trade-offs. They may enjoy a daily milkshake on the way home from school, or a magazine every week, but if they really want that iPod, they should drop the extras and save.

• Encourage your child to keep notes on what they spend This way, they can see where they are spending money and where they could be saving. It will help to lay the base for a budget too. You could also teach your child the basics of a computer package such as Excel for this.

Laduma!

• Goal setting is a vital lesson in the value of money and saving, because if we don’t have goals, we don’t accomplish anything.

• Help your child to set goals. Let them know your objectives and dreams and help them decide on a goal that is doable. They need to say: I will do this by that time.

• Track their progress. Children are impatient. They want it now. To help them see progress, make a chart that shows it. Show how many weeks it will take. Mark off the savings each week.

• Reward children for reaching their goals. It’s time to go out and buy what they have saved for (and maybe that long-lost milkshake to celebrate). This is an important moment for your child. Praise them and make a big deal of their achievement, then set the next goal!