Saving is one of the key skills, which an enterprising person should have. The dictionary says that to save means: spend little money in order to be able to set it aside for some purpose; not to use something all at once, keeping part of it for later.

So let us try to show our kid what saving is all about. Before we start, we need to discuss the matter of giving children pocket money. Opinions about this vary. Many parents explain that it is one of the effective ways to teach a child to save. Unfortunately it is also an effective way to teach a child that he/she is entitled to some things, just because, without effort, without any work. A claim attitude is not something that helps work in a group. Also it does not develop perseverance and creativity.

Giving a child pocket money is not a bad idea, however it is a good idea to make sure it is not a donation. How? Suggest a game.

For the kid to start saving, it must have an income. Preferably one, which requires some effort, however limited. Thus we will employ our child in the family business. Because every employee has to sign an agreement, the kid must do the same. The agreement in our exercise will be called “the contract”. This is a widely used method of working with children. It allows rules of the job to be laid down and the consequences of not doing the job to be defined. Naturally we will prepare it together with the child. The drawing below shows an example of a contract for a 4-5 year old (in Polish)link opens in a new window.

In the contract we specify the regular performance of 1-2 activities for 3-4 year olds, to the maximum of 5 for 6-7 year olds. This will allow the child to remember the tasks. The digits from 1 to 4 mean weeks of work. There are 5 working days during a week, thus every day the kid will earn 3 stars, if it does the job. Once the contract is ready it is best to sign sign (preferably during a ceremony). If the kid cannot write you can use its photo instead, a fingerprint, a picture of the favourite toy etc. The contract shall be signed by the child and the parents. Now you can display the contract in a visible place to keep the kid motivated.

Pocket money shall be paid on Fridays. The education begins with small amounts (3 stars could be worth PLN 2 or PLN 1). Add-up the stars on Friday evening. With younger kids you can draw sets of 3 stars. Count how many full sets there are and convert the result to remuneration. If the set is incomplete, then the stars will be added to the next week.

Before the kid starts to work, together watch the short video “Sebastian and first savings”link opens in a new window. The video was prepared by Bank Millennium Foundation for the Financial ABCs programme.

Before watching it get one more piggy bank (preferably one, which can be opened without destroying it). We will show it to our child after having seen the video about Sebastian and first savings. Also explain that every Friday, according to the contract, he/she will get pocket money. Out of this amount PLN 2 (or PLN 1 if the kid made only PLN 2) will always be put in the piggy bank, with the remaining amount available to pay for some purchase during the week. The change remaining after the purchase will be put in the piggy bank. This will continue for 3 weeks. On the Friday of week 4 the kid will be given the remuneration as well as the money saved in the piggy bank. During a visit in a shop it is the parent’s task to start to talk about whether it makes sense to save; can the kid now buy something more valuable than when it could only spend the money earned? This is what saving is all about. It is about about putting money aside for later.

Another exercise about this subject can be saving for a specific purpose. First find out what amount will be needed. Kids who cannot count can be given a crib sheet, like that (in Polish)link opens in a new window.

Draw or stick on it as many coins as the kid must gather. If the price is high, the kid might have to collect only part of the entire amount. Whenever the kid has deposited a coin, he will cross out one from the list. Older kids can count the money every week and record on a sheet of paper how much they have and how much is still missing.

Finally some books for children:

• “Sebastian and first savings”, Bank Millennium Foundation
• “Wise saving” by J. Wacławik

Good luck!