Good financial habits start young. It’s best to begin educating your children about the importance of budgeting before they have to go out in the big, bad world. By teaching them how to budget and manage money responsibly, you improve their chances of financial success later in life.
Let Your Child Be in Charge of an Allowance
Explain to children that money is a limited resource. Allocating an allowance is an effective way to demonstrate that money must be carefully watched. Allow your children so much money a week, and tell them that they must use their own allowance for any unnecessary purchases. This encourages children to think about what they want to buy and how much they truly want it.
Teach Your Child to Spend Responsibly
Make sure your child understands that there will only be so much money given to them a week, and that if he or she wants something that costs more than the allowance then the money will have to be saved up over time. In addition, discuss the purchases your child makes. Ask what the money was spent on and have your child reflect on the purchases. It is important to discuss the dangers of frivolous impulse buying with your children so they learn to control their spending in the future.
When your child becomes a teenager, it’s time to discuss bills and required expenses. Teenagers need to understand that there are certain expenses that cannot be avoided and therefore should be paid for before any extracurricular purchases have been made. Explain this in terms your teen can understand. For example, discuss the expense of gas if your teen is around driving age. Show them how much gas costs each month and teach them how to allocate a portion of their allowance or pay check to that expense.
Show Your Child the Bills and Budget
To truly demonstrate the importance of budgeting, show your child the bills. Explaining how much it costs to have things like TV, lights, and insurance to your child you will enlighten them about the cost of living. Children and teens need to understand that money isn’t just for buying fun items, but for regular, everyday life.
You can also have your child join you when you go over the budget every month. Showing him or her exactly what a budget is, how it is managed, and how much of your income is put towards different expenses, prepares your child for the day when he or she has to make and manage his or her own budget.
Income, bills, and budgets shouldn’t be viewed as an “adult” topic. Your children will one day be adults with their own bills, and therefore need to be fully educated on how to manage money properly. If you don’t teach them when they’re young, then you are setting them up for years of confusion.
