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How to teach children to save with delayed gratification

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Parents can help their children on the path to being "good" with money by encouraging them to delay their gratification and save their money.

One game I used to play with my kids when we were out was to give them a choice between buying an ice cream or having $2. Or buying a soft drink or having $2.

One of the biggest steps for kids is opening a saving account. If your kids don't have one already, don't put it off. Open one straightaway.

how to teach your kids to save delayed gratification teach children to save

I recommend putting some or all of your children's pocket money into the savings account. Just when you decide to give your kids pocket money or an allowance is up to you.

You may want to tie it to specific tasks or not. If the money automatically goes into their account and your kids don't see it, often they don't want to spend it.

If they have to take it out of their own savings, my kids suddenly become careful spenders.

Teaching your kids to be good savers involves self control and waiting until later. It is important they are competent and careful with money, rather than making silly mistakes.

Encourage your kids to deposit birthday and Christmas money into their savings accounts.

If they can't make up their minds what to buy or are saving for something big, they can park it in the savings account. You may like to encourage their saving by matching their dollars with yours.

Keep a jar in your kids' room and suggest they put any spare money into the jar and watch it grow.

I find that my children need a watertight savings account which they don't touch. This will give them money for their big goals over the medium to long term. Get them to write their goals down.

A computer, travel, university fees or a car? I have met children as young as eight who are saving to buy a house when they grow up.

Most kids' saving accounts are designed for saving, not spending. They teach them an important lesson of money management by rewarding them for not withdrawing by paying a bonus interest rate.

Money magazine's 2011 Best of the Best awards, judged by Canstar Cannex, rated Bankwest's Kids' Bonus Saver the best kids' savings account. Available for under-15s, the interest rate is a whopping 10.01% if all requirements are met.

These include depositing between $25 and $250 each month and making no withdrawals. If you don't meet these, the interest rate drops to 0.01%.

Every 12 months the entire balance is swept into a Children's Savings Account which pays 1% interest on balances up to $5000.

Second placegetter is Suncorp's Kids Saving Account, for under-18s. It allows one withdrawal a month and still pays 5.75%, including a bonus rate of 4.25%. Third is ANZ's Progress Saver for Kids.

Among the non-bank winners the top-ranked Cairns Penny Savings and Loans offers 6% on amounts up to $2000. The other winners are mecu and Victorian Teachers Credit Union.

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Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.
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