10 Ways to Grow Kids’ Savings
Efren Ll. Cruz, RFP®
(This article was featured in Business Mirror.)

They say that charity begins at home. Well, so does saving.

How many new college grads do you know enter the workforce the same way they entered the world for the first time – with barely anything? The common belief would be that years of schooling should have prepared kids for the world outside of their comfort zones. Yet that’s exactly where the problem lies. There is too much reliance on schools when learning at home can be as easy and rewarding.

As an aid, I have developed a 10-step approach to boosting savings among children. The approach is by no means comprehensive. In fact, you may want to add your own steps or take out a few. At the end of the day, however, what is important is to instill in children not just the “time value of money” but also the “true value of money”.

  • Set a goal. If there is such a thing as management by objectives or MBO, then there is also investing by objectives or IBO. Children need to visualize things in order for them to comprehend complex concepts like savings and financial freedom. And like the goals for adults, children’s goals have to be specific as to time frame. They must also be measurable and realistic.

  • Teach them to give first. Money is the sail that will get us to the shore. Money is not the shore. In other words, money is but a tool to achieve the greater things in life like happiness, peace of mind and well being. By giving away some money first, like to church and the needy, you are teaching kids to be “free” of money. More importantly, money given away first, cheerfully, faithfully, wisely and quietly will return a hundred fold.

  • Collect loose change. Even by saving just P3.50 a day for five days in a week, four weeks in a month and 12 months in a year, your child would be able to save P840. That’s even more than what somebody with P100,000 will earn by keeping his money in a savings account in a bank for one year. And your kid will be able to earn more without the huge principal to start with – just with the P3.50 that he or she will save each weekday.

  • Catapult their savings. Admittedly, unless they are assisted along the way, small savings will take many, many years to grow into meaningful sums. In this regard, you could do your share by dangling a carrot. Tell your child that if he or she reaches say “X” amount of savings, you will double those savings. If you give your child P50 a day starting at age 5 and tell him to save at least 10% of his allowance and also promise to double his yearly savings, your kid would have the following accumulated savings account: (This assumes the allowance goes up to P100/weekday by age 10 and up again to P150/weekday by age 15)
Kid's Parents'
Age Savings Share Total
10 1,200 2,400 3,600
15 2,400 4,800 7,200
20 3,600 7,200 10,800
Totals 37,200 74,400 111,600
  • Use the magic of compounding. Catapulting their savings is one thing. Using the magic of compounding on them is another. To further accelerate the growth of their savings, you could place your kids’ money in a savings account or even time deposit to make them earn faster, as shown below:
Kid's Parents' Interest Outstanding
Age Savings Share Total Income Balance
10 1,200 2,400 3,600 448 22,720
15 2,400 4,800 7,200 2,193 64,227
20 3,600 7,200 10,800 4,840 136,369
Totals 37,200 74,400 111,600 25,039 136,369

  • Allow them to taste some of the rewards. Alas, we are all human. It would be nice to reap some of the rewards from our hard work from time to time. In fact, by doing so, we are able to better recognize the value of all of that hard work. In the same manner, let your kids enjoy some of the fruits of their labor. And even if you let your kids withdraw some amount of money from their accounts, say 5% annually, your catapulting their savings and using the magic of compounding will ensure that they enter the workforce with still a considerable sum of money in their bank accounts as shown below:
Kid's Parents' Interest With- Outstanding
Age Savings Share Total Income drawal Balance
10 1,200 2,400 3,600 448 845 22,720
15 2,400 4,800 7,200 2,193 2,288 64,227
20 3,600 7,200 10,800 4,840 4,614 136,369
Totals 37,200 74,400 111,600 25,039 28,875 136,369


  • Introduce the meaning of debt and risk. So far, we have introduced saving and relatively safe investing to our kids. In life, they will encounter debt and risk as certain as they will come face to face with the opposite ***. And just like *** education, it would be better that the teachings come from you rather than from just anybody out there. So when they are already in their teens, teach them the meaning and implications of debt and risk. Debt has its purpose in life and should not be shunned. In fact, some investment strategies are hinged upon debt, or what is called leveraging. Risk, on the other hand, goes hand in hand with investing. All investments bear risk and the cardinal rule is that the higher the potential return, the higher the risk.

  • Get their feet wet in entrepreneurship. Being in business is a form of investing. The higher the potential return on the business, the higher is the risk. Not all are cut out to be businessmen though. Nonetheless, it would be ideal if kids realized their calling to being entrepreneurs when they are still young and able to quickly bounce back from any losses.

  • Teach them the value of insurance. Insurance is needed by everyone, especially when they are just starting out. Insurance is a way of managing risks in life and business, just like diversification is a way of managing risks in investing. It may be an expense, but a necessary expense at that. Teach kids not to run away from their life insurance agent but to face them squarely. To be prepared for such encounters, however, you must also teach them the right way of buying insurance.

  • Be a shining example to them. Perhaps the most important lesson that you can impart to your kids is to be a shining example to them. All of the other nine steps would be lost if you don’t practice them yourself.

Happy saving.

Efren Ll. Cruz is a registered financial planner with the RFPI USA. He is author of the bestselling books, “Pwede Na! The Complete Pinoy Guide to Personal Finance” and “Pwede Na! The Complete Pinoy Guide to Retirement & Estate Planning.” He is Chairman and CEO of Personal Finance Advisers Philippines Corporation. This article does not constitute nor forms part of any offer or solicitation of an offer to buy or sell any securities. The opinion and views expressed herein are solely those of the author’s and do not necessarily reflect those of the Personal Finance Advisers Philippines Corporation.