IT'S important to cultivate the saving habit from young, and it starts with encouragement from parents. SUSHMA VEERA offers some tips.
TEACHING children to save money can be difficult as they know that money can buy what they want and so they usually spend it immediately.
"Today, the younger generation are more tempted to spend than save their money," says Low Kee Fui, head of wealth management and liabilities at Eon Bank Group.
"So, it's important to cultivate the saving habit from young, and it starts with encouragement from parents. They need to show their children the benefits of saving."
He explains that children are used to getting money from their parents and seeing their parents withdrawing money from the ATM, but they don't see the planning that goes into making the funds available.
So, by teaching children the value of money, it gives them an early knowledge about wealth management, he says.
Saving gives both short and long-term benefits. By saving, children can control their expenses and prepare for future needs. They learn to be financially responsible and money savvy.
When to start
There's no specific age to start saving, but it's good to start as soon as parents think their child is ready to learn about the value of money.
Two skills that children need to know about saving:
* Put aside at least 20 per cent of monthly allowance
* Understanding simple money management concepts - for example, parents can show how interest grows in a savings account
* Make saving interesting
Get children a piggy bank and tell them to save part of their allowance.
Parents should not force their children to save, instead try to get them to understand its importance. Once the child is old enough to understand the concept of interest, you can act like a bank and top up his savings. It's a good opportunity to introduce simple but important money lessons.
Opening a savings account is recommended as there are many benefits for young savers.
Smart Junior Account
At Eon Bank, children can check out the Smart Junior Account. Account holders can redeem goodies from online games or get a stamp for every RM50 deposited and redeem gifts. They are also given movie tickets.
For those who get straight As in the UPSR, PMR or SPM examinations, they will be rewarded with a cash incentive through the Smart Junior Academic Excellence Award.
Ways to get children to save
* Let children have a sense of ownership. When parents give their children allowance, they learn about basic budgeting skills. Encourage them to set a sum aside for savings. As they manage their allowance, their money management skills will improve.
* Encourage them to set goals, for example, to save for a holiday, a particular toy or something they value.
* Teach them the value of money - how to save and make it grow, and most importantly, how to spend it wisely.
* Open a savings account. Explain how compound interest works and show how money grows in a savings account. Take your children to the bank to open the account and deposit their savings. Make trips to the bank fun.
* Talk about budgets. Talk about the need for money to be earned and saved to cover household expenses.
Source: New Sunday Times - Sun, Dec 5, 2010 - Sunday Life & Times - By Sushma Veera