SCOTTISH children are spenders not savers, according to a survey by Families Online. Most (89 per cent) Scottish parents give their children pocket money, but 68 per cent of youngsters choose to spend rather than save the cash.
The most popular purchases are toys, followed by sweets and chocolate. The most common age for children to start to receive pocket money is six, and a quarter of children in Scotland get £5 a week. Almost half (42 per cent) earn the money by undertaking household chores.
Anna Bowes, director at Savings Champion, an independent savings advice site, said: “Saving money is one of the most important aspects of building wealth and having a secure financial foundation.
“It therefore makes so much sense to get children into the habit of saving as early as possible. Saving just £20 a month earning three per cent gross could realise a lump sum of over £5,700 after 18 years. Increase that to £50 a month and your child could have over £14,200.”
Here are The Herald’s top tips to turn your kids into savers not spenders.
Talk to your children about money
Parents often think they are protecting their kids by talking about money behind closed doors, but it might not always be wise.
Kirsty Bowman-Vaughan, children and young people expert at the Money Advice Service, said: “Involving children in discussions about money from an early age will give them the independence, understanding and best chance of being financially secure in later life, causing less strain on the parents in the future.”
Get a piggy bank
A piggy bank can help to make saving more exciting, particularly for younger children. Ms Bowes said: “A great way to motivate children to save is to get them to fill up the piggy
bank.”
Set a savings goal
Encourage your child to save up for a more expensive toy or game, instead of blowing their weekly pocket money on sweets. Ms Bowes said: “Aiming for a specific target can be a great way to promote saving.” You could also help them to work out how much they need to save and for how long to reach their goal.
Reward saving
Giles Martin, head of savings at Halifax, suggested offering rewards such as screen time or a trip out to children who save. “You could also use a sticker chart to create rewards for savings,” he said.
Match contributions
Matching your child’s savings can prove a big incentive - and it has another benefit. Mr Martin said: “Matching can also teach children from an early age about the concept of workplace pensions saving.”
Lead by example
Children often mimic their parents’ behaviour, so if you are a spender, your children might find it difficult to put money aside each week. Bowes said: “Children learn by example, so the best way to teach your child about saving money is to save money yourself. Reiterate the message that every time you get paid, you save a portion of your salary to help prepare for the future.”
Open a savings account
Your child will not earn interest on the money in a piggy bank so it is a good idea at some point to open a savings account for your little one. Try to include your child in the choice of account and take them to the bank or building society to deposit cash. Older children can also help to manage the account and keep track of their savings. Bowes said: “It can provide a great source of motivation for children if they understand that by putting their money into a savings account rather than simply spending it, it will grow over time.”
Children’s savings accounts
Most banks and building societies offer children’s savings accounts, though rates of interest vary. An easy access account allows you to pay in and withdraw cash when you want. HSBC offers one of the top children’s easy access accounts, paying 2.75 per cent on a minimum deposit of £10. The account is only available through branches.
Or you can opt for a regular savings account, which typically pays a higher rate of interest but you must commit to saving money into the account every month. There are often limits on the amount you can put in and take out. The accounts also usually last only for one year.
You can earn four per cent in Saffron Building Society’s regular saver, which runs for one year. The maximum monthly payment is £100 and you can make unlimited withdrawals. The account is available in branches and by post.
Children, like adults, have a personal allowance of £11,500 for the tax year 2017-18. In other words, they do not have to pay tax on their annual income, including interest, below this amount.
Just watch out for the £100 rule. If a parent or step-parent gives a child money that earns more than £100 a year in interest, it is taxed as the parent’s own. However, the £100 rule does not apply to other relatives or friends – or to Junior Isas or Children’s Bonds.
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