Tips to teaching kids to save

The simple money lesson for younger children is obvious - put your cash in the bank and it'll grow. Yet as they get older there's another valuable lesson to be learned - a bank's job is to make money from you - our job is to try and keep our cash.
This may sound like a tough message to teach kids, but it's crucially important. The banks would like us to say "put your money in the bank" not "it's which bank you put your cash in that counts". So here's some top tips for helping kids learn and understand about saving.

• The difference between piggy banks and real banks
  Here's a handy simple explanation: "Put your cash in a piggy bank and it sits there, but put it in a real bank and you're actually lending them your money - so they need to pay you for it.
  "The amount you're paid is called interest and the higher the interest on savings and the longer you keep it with them, the more they are paying you. If the interest is 10%, that means they pay you 10p a year for every pound that you save with them."
  
• Pick the account together
  Look through the best buys together, explaining accounts pros and cons (if you're unsure see interest rates for beginners and make the decision together). Better still go to your local bank or building society and get your child to ask for an account there and compare its deal with the best here.
  
• Talk through freebie grabbing
  Explain that many banks try and tempt you in with freebies, but often they're the ones that don't pay good interest. So pick an account for interest, then discuss opening other accounts with just the minimum balance to grab the freebies (see best freebies).
  
• Get them to monitor the rate
  If you go for an easy access or variable rate deal, put your child in charge of checking the interest every month to see if it's still paying a decent rate and move it if not.
  
• Is it safe?
  It's an interesting discussion to have with children. There's a balance here, a piggy bank is kept at home where you can see it though it can be stolen (don't say that if it'll scare them). Yet, money in the bank is safe and earns interest, but there's a very slight risk the bank may collapse.
  However if it does, provided it's a UK regulated account (all those listed below are) the money is protected up to £85,000 per person by the government (see the safe savings guide) which is as safe as we can hope for.
  
• Defer an element of pocket money
  One easy trick is to defer an element of pocket money to show the extra reward from savings. For example, if their pocket money is £3, give them one for spending and another for saving. Then tell them for every pound they do save you'll give them an extra one at the end of the year as a reward. For more pocket money tips see Martin's give pocket money as pay blog.

These are just the tip of the iceberg, for more see the free teen cash class PDF, Martin's moneysaving tips for nine year olds blog (and ensuing discussion) plus the things teens need know about cash discussion and full Financial Education Campaign section. You should also check you're with the best child trust fund.