There’s a famous saying that “money doesn’t grow on trees”. It means you have to work hard to earn money and there isn’t an endless supply of it.
So how does money grow?
The short answer is good savings habits.
And if children start saving and putting money into the bank when they are young, they will see exactly how fast their money can grow by the time they are an adult.
Ainslie van Onselen, a Westpac spokesperson, said all children should open an account and start learning how earning interest* can help them make money.
“Banks actually reward you for saving with them,” Ms Van Onselen said.
“Whatever you save in most accounts will earn interest, which is extra money the bank pays you in return for you giving your savings to them to take care of. The longer you leave the money in the bank untouched, the more interest and money you can earn,” she said.
“The more you put into savings and the longer you let it sit there getting bigger, the more you get to see it grow.
“Quality is often better than quantity*. Making small, regular deposits* rather than a one-off, bigger deposit helps to gradually build up your savings in the long term and also helps create good savings habits.”
The 2017 Westpac Financial Futures Report found 86 per cent of parents, grandparents and soon-to-be parents believe that opening a savings account for their children or grandchildren at an early age sets them up for success later in life, yet only 71 per cent of Australian children under five years of age have a savings account.
The report also found parents’ main motivation for opening their child’s savings account from an early age centred on giving them a financial head start (55 per cent) and helping them understand the value of money as early as possible (46 per cent).
Ms Van Onselen said it was a good idea to give children a savings account in their own name because it makes them more accountable* and responsible for their own savings.
“They generally have more ownership of their savings goals and when they achieve that goal, they feel the ownership of the results of their hard work. It becomes a habit to save,” Ms Van Onselen said.
She added that being able to set a goal and then watch the balance grow in a savings account was important in today’s cashless society.
“Children today need to be digitally* financially literate*,” she said.
Ms Van Onselen said exposing children to money at a young age helped them gain confidence with savings and be aware they could achieve goals — not just with money but in life in general.
She said her own girls, Chloe aged 9 and Sasha aged 11, were learning the value of money this way.
“With my kids we started putting away a small amount each month for them in exchange for helping out around the house. They see the number growing each month via an app on their phones and it gives them a sense of achievement.”
FOUR STEPS TO HELP CHILDREN CREATE GOOD SAVINGS HABITS
1. Set up a bank account in the child’s own name. This can help make children more accountable and responsible for their own savings.
2. Set up an app on the child’s, or parents’, phone so the child can see the savings amount in their account quickly and easily and watch it grow over time.
3. Slow and steady wins the race! Setting aside money on a regular basis, even if only small amounts, helps build up savings gradually and gets children into the habit of saving.
4. Help your child set a goal or target for what they are saving for. Some savings accounts allow you to set up different compartments*. That way you can save for different things such as a big item (a trampoline), but also be able to spend money in the short term for a quick reward like a new game.
THREE THINGS TO WATCH OUT FOR WHEN OPENING A SAVINGS ACCOUNT
1. Interest rates: Look for a strong one to help your money grow. Chat to your bank about getting the right account for your savings needs.
2. Account fees: some accounts will charge transaction and monthly service fees. Others won’t if you contribute regularly. Choose carefully as you don’t want fees eating into your savings.
3. Bonus interest: some accounts give you bonus interest — an extra reward — if you regularly put money into your account, say weekly or monthly.
* NOTE: Content in this article is general information only. Please ensure before taking out a bank account that you read the terms and conditions and ensure the product is appropriate for you.
interest: extra money a bank pays in return for giving your savings to them to take care of
deposits: sum of money paid into a bank or account
accountable: responsible and able to explain one’s actions
digitally: digital or computer technology
financially: about money
literate: able to read, write and understand
compartments: separate sections
LISTEN TO TODAY’S STORY
1. What is interest?
2. What percentage of Australian children under five years of age have a savings account?
3. What is the main motivation for parents opening savings accounts for their children?
4. What do children gain from being exposed to money at a young age?
5. Why should you avoid account fees?
1. Watch it grow
After reading the article, see if you can answer the following questions and choose the best savings account for an 11-year-old girl named Jessica.
Where should Jessica put her money?
If in a bank, whose name should the account be in?
How will Jessica know how much money she has?
What is the advantage of keeping her money in a bank account rather than a money box?
Out of the 3 banks listed below, which do you believe to be the best bank account for Jessica? Explain your reasons.
|Savings Plus Bank||Money Earner Bank||Goal Bank|
|Interest on savings account||$0.2%||0.1%||0%|
|Bonus interest if deposit over $10 each month||0.1%||N/A||0.05%|
|App to show savings progress||No||Yes||Yes|
Extension: How is interest on a savings account similiar or different to the interest banks charge for lending people money for a house or car?
Time: Allow 20 minutes
Curriculum links: English, Mathematics
The glossary of terms helps you to understand and learn the ambitious vocabulary being used in the article. Can you use the words outlined in the glossary to create new sentences? Challenge yourself to include other VCOP (vocabulary, connectives, openers and punctuation) elements in your sentence/s. Have another look through the article, can you find any other Wow Words not outlined in the glossary?
HAVE YOUR SAY: Do you have your own savings account? If yes, how much have you saved? If no, do you think you need one?
No one-word answers. Use full sentences to explain your thinking.