With the national and Capital Region personal savings rate hovering at just 5 per cent, it’s no wonder that 56 per cent of workers already saving for retirement have accumulated less than $25,000. Further, 68 per cent of those who say they haven’t put anything away for the future, have total savings and investments of less than $1,000.
For kids, the thought of retirement is pretty much non-existent, but teaching them the principles of saving for the future--whether it’s a car when they turn 16 or go off to college--or anything in between is of vital importance. By learning how to be financially literate, your kids will have a much better foundation for saving when they reach their 20s and beyond.
A penny saved
As you’re encouraging your youngster or teen to start saving for the future, here are a few “tricks” that could make things a lot easier.
- Pay yourself first. Help your kids put their savings on “auto-pilot” by forming the habit of immediately saving a portion of their income (allowance, earned money, gifts, etc.). If your child has a savings bank account, use bank statements to illustrate the power of compound interest! If your child doesn’t have a bank account, consider paying them “interest” for every dollar they save in their home “bank.”
- Link savings to expenses. A person with many expenses will have a smaller portion of money left over for spending or saving. A person with fewer expenses will have more disposable income. By helping your child understand the value of saving as much as they can while they have the opportunity to put more away, you’ll be reinforcing the importance of planning ahead. Of course, your child will always save more if they pay themselves first.
- Know where it goes. A great way for your kids to learn how to stick to a budget is to keep a money journal. Have them write down all their income and subtract all expenses. A money journal isn’t only helpful to see where their money is going, but it’s also a great primer for balancing a checkbook.
- Slash expenses. Pull out the grocery ads from your newspaper and go through the sales with your kids. Find ways to cut costs--such as buying sodas in bulk instead of through a cafeteria vending machine, or bringing their own lunch to school.
An old company used to say, "An educated consumer is a our best customer." Teach your children and get them on track for a healthy financial future.
Dave Balog teaches financial basics for families. firstname.lastname@example.org. 355-0967.