8 min read

How to get your kids into the savings habit

Financial education became an official part of the National Curriculum in schools in 2014, to the delight of campaigners who wanted kids to get formal lessons in money management.

A small child putting coins into a pig money box

But informal lessons on money are also really important – and this is where parents come in. They play a vital role giving children practical lessons to boost their financial literacy. Even something as simple as getting them a piggy bank can be a great way to encourage younger children into the savings habit.

Set savings goals for your kids

If you give your children pocket money, or they ever receive money as a gift at Christmas or on their birthday, encourage them to put some of it aside to save for the things they want. Why not try out OneFamily’s Pocket Money Calculator to show your kids what they could eventually afford if they saved some of their monthly or weekly allowance?

Setting savings goals is a habit which will stand children in good stead into adulthood, and helps them understand the value of money and appreciate the things they have, if they’ve had to save up to get them. Some parents even believe that you should give your children pocket money for doing chores as a way of teaching them this value.

You can lead by example and start saving for your child from the moment they’re born. Taking out a Junior ISA, for example, is a great way to put money aside regularly for your child from a very early age and give it time to grow.

Junior ISAs are long-term, tax-efficient savings accounts which let you put away up to £4,128 each tax year (rising to £4,260 in 2018/19). You can open a Junior ISA for your child from birth with as little as £1 and start making regular savings into it in their name. Other people such as grandparents or family friends can pay in too, up to the annual limit.

What about when your child reaches 18?

Junior ISAs are different from ordinary cash savings accounts because the money is locked away until the child turns 18. At this point, the money you or other family members have saved becomes your child’s, and the Junior ISA gets converted into an adult ISA which they can then access.

This means they can do whatever they want with the money. Hopefully with some good money management skills, they will be more inclined to spend the savings on a house deposit, higher education or something to bolster their future.

In the meantime, while the Junior ISA is under your control, you can involve your kids in the savings process. Show them how much money is in their ISA and how it is growing every month. This can help teach them about the likes of interest and compounding if they’re old enough to understand.

Introducing the value of investing

A Junior ISA can be either a Cash ISA or a Stocks & Shares ISA, and you can split your annual allowance between both types. If you’ve set up your Junior ISA early and it has plenty of time to mature, investing it in a few different stocks or funds can mean the money works harder and grows faster than cash would, especially compared to the meagre interest rates available on some cash savings accounts at the moment.

However, remember there is risk involved in investing – so do your research where you need to. Stocks and shares can fall as well as rise, so it’s possible to get back less than you invested. At the age of 16, your child can take over the decision-making as to what investments a Stocks & Shares Junior ISA holds. This can be a great introduction to investing, as well as making teenagers more invested in their own financial future.

Find out more about OneFamily’s Junior ISA >


Written by Hannah Smith – Financial Journalist

Note: Whilst we take care to ensure Talking Finance content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions.