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Great Savers Are Made Not Born

Saving does not need to be one large investment at once, as little by little is just as good.

MEXICO CITY — A parent’s job is to try to give their children the best education and opportunities possible. To achieve this, many experts say one essential thing parents must teach their children — one that will make their lives easier — is financial education.

Elizabeth Martínez, a family woman who works as a freelancer, encourages her children to save their money traditionally.

“If after we buy something, we have some change left, we put it in a piggybank we have at home,” she said. “It’s not as if we save a huge amount, but it allows us, at month’s end, to go out and buy some ice cream or sweets.”

Parents can start teaching children to manage money with a weekly allowance or by gifting them money during special events and occasions, such as birthdays. This practice will give them some tools for their future.

Developing a saving habit can help children have money when they most need it. (Mathieu Stern/Unsplash)

Familiarizing them with the most basic financial concepts will allow them to grow to be financially stable and independent adults, more aware than previous generations and more financially responsible.

Javeli Juárez Espinosa, a retirement specialist advisor, working at Profuturo, believes that there is never a wrong time to instill these values in children. Although teaching children complex terms, such as long-term savings, may sound strange, there are saving plans on the market, such as Mexico’s Afore Children account, which she considers the ideal tool to learn how to save money.

“Parents or the child’s legal guardian can go to an Afore agency to register their child’s savings account. From that moment forward, the kid will start planning saving goals and increase their resources with any additional contribution they make. When they have enough money saved, they can withdraw it anytime. And, if the child’s account continues to be active when he grows up and begins his working life, all the savings he had until that point will be transferred to his Afore account, and his investment will continue to grow,” he said.

The specialist also says that “children learn mostly by example, which is why parents should take the initiative.” According to her experience in the field, only about 1 percent of his adult clients have asked for an Afore Children account.

According to the webpage to the National Commission of the Savings System (Comisión Nacional del Sistema de Ahorro para el Retiro, CONSAR,) children can contribute with as little as 1, 5, 10, or 15 pesos and with as much money as they want to their Afore Children account.

Melissa Galindo, an Afore agent, estimates that if there are contributions of five pesos each day during the first 18 years of the child’s life, the account could reach up to 50,000 pesos ($2500), considering the interest rate. “The advantage of this is that they can withdraw the money whenever they need to,” she said.

Children learn financial habits from imitating their parents. (Adrian Cogua/Unsplash)

CONSAR reported that as of April of this year, there are 78,718 Children Afore accounts. The service has existed since 2016.

Not all families have access to these types of saving accounts. Martínez was not aware of these savings options for minors, and as she is not on any social security registry and, therefore, is not entitled to an Afore account.

She could open an account on her own, but she prefers traditional saving methods. She says children do not understand the concept of saving so quickly.

“I think that though it is important to encourage in them a saving habit, in the end, it is the parents who give the money while the kids are still young. They will only begin to be aware of the value of money when they are 8 or 9 years old, which is when parents start to give them some spending money to buy some sweets at school, or grandparents give them a weekly allowance. When children start to act conscious about their money, they may wish to save it up to buy something they want. Before that, I don’t see how it would benefit their financial education,” she said.

Alejandro Molina, an insurance advisor at the GNP insurance company, believes children can see the benefits of formal savings, such as the Afore Children account.

“Children learn through imitation, so they will learn to spend or save their money following what they see at home. No matter how young they are, they will learn that money is used to get something in return, even if they do not still understand all possible bills and denominations. Thus, it is advisable to teach them the usage of money first so that they can understand the value of saving it,” he said.

(Translated and edited Mario Vázquez; edited by Kristen Butler)