There is one common myth that suggests that poor cannot save because they have very little money left. Basically, they can’t save because they earn even less than they require for spending to fulfill their basic necessities.
Do you think this is correct?
The US is one of the richest countries in the world, yet less than 50% of its population has no or very little retirement savings. If you are one lucky fellow who starts working at the age of 25, by the age of 65, your chances to be wealthy are 1 out of 100, and if you are super-duper lucky, by age 65 you will be among those 63% of people who survive on social security, charity and help from friends and family. You know, the savings of an average 50-year-old come to just over $43,000, and if you are married and over 65, your medical expenses alone will cost you more than $200,000 a year.
Statistics are not supporting your case here if you are in 20s and living the kind of life where you buy a new smartphone with your credit card every six months, or spending money on getting front row tickets your favorite band. Statistics don’t support you if you are in your 30s or 40s and have kids to raise and family to maintain, while saving for retirement at the same time.
Reasons for this could be that you never learned how to save, or purposefully ignored the plain and simple advice to start saving from an early age and develop the good financial discipline in your life. It’s not about whether you are earning or not but rather how do you actually care for the money you receive from any source. It is all about being responsible enough to take really small baby steps which can really add more value to your life later on.
You know, if you are a parent, you can be the best teacher for your kids, and if you are living a financially undisciplined life, your kids will be irresponsible with their money too. Rather than reading top 10 tips to develop saving habits, focus on intervening at the early stage of your child’s development and inculcate all the saving habits from early age.
Stanford University developed a rather simple research program to understand as to how intervention can actually help children save and become more averse to risk. This study was conducted in Ghana—a country with one of the lowest saving rates—and it was demonstrated that with a little intervention, children in one of the poorest countries of the world can be taught how to save and become more cautious with spending money.
Have you ever thought of intervening into your kids’ lives to help them develop good saving habits? Right from today, what you can teach your children how to save? If you can’t come up with the plan, here are simple routines you can introduce in your kid’s life to help him save more and develop better discipline and self-control:
- Start saving 50% of the money your kid receives in gifts. There are many banks that offer bank accounts for minors. Find one near you and start shoving your kid’s money into that account.
- Set up social games with your children that can encourage savings; i.e. make envelopes for them and ask them to divide some portion of their income into those envelops.
- Involve your children while you are making budget for your home expenses. Explicitly engage them on discussions regarding why budgeting is important and it can save them money.
- Don’t always buy the stuff your children want; develop their delayed gratification habit.
- Encourage your child to start a small business in school or neighbourhood.
Remember, if you are a parent, you can be the single most important influence on the financial future of your kid. The more responsible you are, the better the future will be for your kids. The decision is all yours.