How to Motivate Children to Save Money: A Proven Strategy from the 1970s
Teaching children the importance of saving money is one of the best gifts parents can give their kids. With a little creativity, parental guidance, and a touch of financial magic, little savers can grow into financially responsible adults. Let's explore how the savings strategies from the 1970s can still be relevant today.
Introduction to a Time-Tested Method
One of the most effective ways to instill a strong savings habit in children is by opening a post office savings account. In the 1970s, my mother opened such an account for me, and it had a profound impact on my financial upbringing. This account came with a passbook that showed entries as debits and credits, providing a clear visual of my transactions and balances.
Understanding the Basics with 'Free Money'
At the end of the year on December 31st, the post office would add interest to the account for the year's accrued transactions, but this interest would be paid in a lump sum on January 1st of the following year. As a nine-year-old child, this 'free money' was a huge motivator. It wasn't taxed, and the allure of receiving unexpected cash was immense. This positive reinforcement encouraged me to save more whenever possible.
Using Savings as an Educational Tool
One of the most valuable lessons I learned was how to manage my pocket money. If I received my allowance on Saturday and didn't want to spend it on candy or other trivial items, I could use my savings from the passbook. This gave me the concept of value and, in hindsight, the idea of double entry bookkeeping. It was also a form of rebellion: if I was 'naughty' and didn't receive my pocket money, I could withdraw from my savings and buy what I wanted.
The Value of Savings Over Time
It is important to understand that, while the amount of interest earned may seem small, it adds up over time. For example, if I saved ￡5 from my pocket money, even a small interest rate could be significant. When I started working, earning ￡50 per month, I would put ￡5 aside for savings. This savings account typically offered a 15% flat interest rate, making the act of saving more rewarding.
Security and Accountability: A Lesson in Financial Responsibility
These savings accounts also served another purpose: protecting the staff. The bank staff had their transactions checked by a line manager, adding a layer of transparency and security. While this may seem invasive, it was crucial for the protection of the staff, especially in high-value transaction areas or smaller branches where blackmail or extortion could be a concern.
Encouraging Savings Habits in Modern Times
Unfortunately, post office savings accounts are no longer as prevalent as they were in the 1970s. However, the core principles of setting up a savings account and encouraging children to save a portion of their pocket money remain just as relevant today. Modern parents can use savings apps and digital piggy banks to teach children about managing money. Regularly discussing financial goals and the benefits of saving can help children develop a long-term perspective on managing their finances.
Teaching Financial Management through Positive Reinforcement
By setting up a savings goal or reward system, parents can further encourage their children to save. For example, if a child saves ￡5 a week, they could receive a small reward or be allowed to choose something they want. This positive reinforcement can be paired with educational activities such as showing them how to manage a budget or introducing them to the concept of compound interest.
Conclusion: The Legacy of Saving
The savings habits established during childhood can significantly impact a person's financial future. By following the example set by my mother in the 1970s, today's parents can help create financially savvy and responsible children. Encouraging savings, even in small amounts, can lead to substantial financial gains over time, setting a strong foundation for future financial success.