- Get a piggy bank for your child. You can start this with children as young as 3 years. Have your child put coin/s on a schedule (daily, weekly). This will help her/him get into a saving discipline – which is the foundation of self control. See them witness the magic of ‘regular savings’ in months.
- If your child starts Step 1 at 3, then at 5 years age, add another piggy (can be a jar). Label her/his first piggy/jar as ‘Save’. This new piggy/ jar can be now labelled as ‘Spend’ or ‘Share’. Now the child will have to make a choice (decision time) – which of the two piggies to put the money in, on the schedule. Or to ‘allocate’ parts to each.
As the names suggest,
- the ‘Save’ piggy saves – puts aside for further (longer term/ future) use.
- The ‘Spend’ piggy collects for spending immediately /in near future.
- The ‘Share’ piggy collects money to share with others – this can be for buying gifts for loved ones or for donation – supporting a cause.
- By child’s 8 years of age, add two more jars to the above 2. Now your child may be ready to move on to a more sophisticated ‘4 jars money management system.’ (You may want to add a jar at a time). The 4 jars are for ‘Save’, ‘Spend’, ‘Share’, ‘Invest’. There is no particular, right or wrong sequence. It depends on your thought, practicality and plans. You may try out over a period of time and see what works the best for your child.
- 9 years (or once the child has used the 4-jars system for a year) is a good time to start kids on a pocket money routine. Encourage them to talk about what they are thinking when they ‘allocate’ their funds to their four jars. Kids may want to set themselves ‘short term’ saving goals (buying a toy or bag) and ‘long term’ investment goals (buying a bike, saving for college) and track their performance.
- By 13, kids may be trusted with a debit card with withdrawal. Do have a dialogue with them before and take time to answer questions. Encourage them to keep account of their expenses and then tally it with the card statement.
- Around 16, they may get excited to earn through some entrepreneurial venture, small jobs, tutoring etc. Encourage them, it is a foundation for entrepreneurship and they can learn a lot – responsibility, work ethic, commitments – by doing.