It’s never too early to begin saving. Ideally, you should begin as soon as you start working and begin earning money for yourself. This could be when you are five years old doing chores for your parents, or it could be when you enter the workforce after college in your twenties. 

But do you know why it’s important to start saving as early as possible? One main reason: compound interest. As an example, if you were to start saving at age 25, you’d have saved more than twice the amount of money by age 50 than if you’d started at 35 (assuming a net annual interest rate of 7.06%). 

If we’re to become an economically strong nation, we need to encourage a culture of saving from early on. So how do we encourage our children and young people to place importance on saving and investing? 

Here are our top tips:

  1. Make a savings goal chart. Once you know what your child wants to save for, figure out how many weeks it will take and map this out on a chart. You can represent each week with a box and your child can get a sticker in that box once the money from their week’s allowance has been set aside.
  2. Offer rewards for saving money. Rewarding your child for saving his or her money will encourage them to save even more, as they’ll immediately see the benefits.
  3. Set a good example. Most young people mimic their parents’ behaviour, so when they grow up seeing you save money, it will provide them with money lessons that will further inspire them to save.
  4. Match their contributions. A “savings match” can be a great way to encourage children and young people to save extra money. It’s also a way of showing them how many corporate retirement savings programmes work too.
  5. Open a high yield savings account, like a money market fund. When your child can understand the concept of interest, search for savings accounts that earn interest and help them open an account online. You should also explain to them how compound interest works so they are aware of the impact starting to save early could have.
  6. Help them prioritise. An older child could write out a wish list of things he or she wants to spend money on and then they can prioritise that list. Ask them to think long-term such as buying a laptop for college, taking a graduation trip to Cape Town, or even making a down payment on a house someday.
  7. Let them make mistakes. Sometimes the best lesson comes from a poor decision – especially when the child is young and the financial loss won’t be so great. So let them make small mistakes, as these will be the financial lessons they’ll truly remember.
  8. Talk about money. So many families treat money as a dirty word but the sooner you start discussing your financial plan and the arrangements you’re making, the sooner they’ll start to become financially savvy. This could simply be having a conversation with your spouse or friends while your children are in the room.
  9. Look for good deals or discounts with your children. This is a great way to teach children about the value of money. For example, if you’re buying groceries, explain that a certain product is currently on special at the grocery store, so you’re going to buy more of them and eat them for dinner instead of your usual option. 
  10. Teach children frugal habits. For example, give them an allowance for their clothes and other personal care products. In order to make this work, you cannot bail them out if they run out at the end of the month. This will teach them to shop carefully and plan wisely.
  11. Help them keep a diary of their expenditure. If they have trouble keeping track of how they spend money, teach them to jot every bit of expenditure down. This way you can help them analyse and see how much they can save, or where they need to cut down.
  12. Once they’re a bit older, teach them how to invest their money. You can start by having them pick stocks or unit trusts and tracking how they are performing. This will show them the risks and benefits that come from investing.

If you’re looking to help your children start saving, an interest bearing investment product like the ICEA LION Money Market Fund would be a good start. Your child can earn monthly interest and the cost is minimal – up to a 2% annual management fee – plus your capital is preserved