What are the 3 essential money habits to start teaching your kids? (Habit 2)

This is the second of three blogs on three essential habits to help your kids become rich.Taking the actions set out could have a significant and positive impact on the future financial wellbeing of your kids.

Your kids’ financial wellbeing will be determined by the money habits they form. Let’s make sure they form good ones!

Here are the 3 essential money habits to start teaching your kids in 2020:

Habit 1: Get them to put away 10% to 20% of money they receive for the long-term

Habit 2: Get them to save up for something they want to buy

Habit 3: Get your kids to record how much money they have each month

There are other money habits which you can teach your kids but these three are my ‘essentials’. These are in order of impact, so I’d recommend you read the first blog now if you haven’t done so already -> What are the 3 essential money habits to start teaching your kids? (Habit 1)

Habit 2: Get them to save up for something they want to buy

I’m a big fan of saving, however, I appreciate that just saving isn’t much fun, especially for kids. We therefore need to help our kids form the habit of saving but with a reward at the end: being able to buy something they want.Therefore, this habit is about ‘saving money to spend later’.

Why is this save such an important habit?

This habit teaches your kids about delayed gratification. You will have read in my blogs, and in my ebook, how delayed gratification is a skill which will really make a difference to a kid’s life. In a world where you can get instant gratification so easily, we need our kids to learn to wait.

“People who delay their gratification for a later day or time, end up having more success in all areas of life; financial, health, career and relationships”.

If kids learn to save up for things they are much less likely to misuse credit cards and enter into other forms of debt.  Debt is one of the main reasons so many people suffer mental health issues. Financial stress from debt can take over your life and sadly, going into debt is easy.

For more information on the importance of delayed gratification please read my blog ‘How to teach you kids about: Saving money to spend later' and read the book ‘The Marshmallow Test’ by Walter Mischel

How to help your kids create this habit:

✔ Get your child to sit down and write a list of things they really want - the longer the list the better

✔ Get them to pick their top three items (‘rewards’)

✔ Get them to research how much each 3 cost

✔ Based on their pocket money and other money they have or might receive, pick one reward they might be able to buy in 4 to 8 weeks

✔ Create a flow chart to help them (or use the Blue Tree Habit Maker tool)

✔ Get them to put money aside to pay for the reward

✔ Celebrate when they do finally pay for it

Tip: When they are saving for their reward, try not to mention the reward or change the subject if they do bring it up. The best way to help your kids delay gratification is distraction.

What ever you do, do NOT give them a loan “I’ll buy it now but you won’t get any pocket money for 3 weeks”.

To help your kids learn about delayed gratification with stories, games and pocket money, I strongly recommend you read this blog.

Last word

There you have it - start today to make a big difference to your kid’s financial future.

ACTION: Get your kid to focus on a reward they want and help them save for it.

Remember, this money should come from money that isn’t being saved for the long term (Habit 1).

I hope you found this blog useful - if so, don’t forget to share it with other parents so they can start helping their kids form good money habits.

Now onto the last of the three essential habits to teach your kids -> What are the 3 essential money habits to start teaching your kids? (Habit 3)

Useful links:

Blogs you should read based on the above:

Recommended books: