How Do You Teach Your Children To Make A Budget?
Forget buying your kids that flashy motorized jeep or that luxurious Barbie estate. The best gift that you can give your child is the gift of money sense. By teaching your children the value of a dollar, they may be able to forego the toy-sized versions and afford a real jeep or luxury estate when they grow up. And most importantly, they will be able to recognize when they cannot.
Learning financial responsibility and a healthy respect for the mighty dollar begins at home. If you aren’t sure where to start, here are a few tips to set you on the right path.
1. Allow them to “earn” an allowance
Earning an allowance for doing chores teaches your child to have a good work ethic and makes them appreciate the value of a dollar. There are, however, a few considerations to keep in mind when creating an allowance.
Determine what chores are part of what makes up the allowance. Some jobs should be done simply because they are a part of contributing to the family unit, while others can be considered the ones that are “for pay.”
Pay the allowance in different denominations–including coins–in order to teach your children about currency.
If they fail to complete their “for pay” tasks, their allowance will not be paid out.
A common way to calculate a weekly allowance is to give them a dollar for each year of their age.
Once they are old enough, they can work at a part-time job instead.
2. Open a Bank Account
Opening a bank account for your child will not only make them feel grown up and introduce them to the formal financial world, but it will also provide them with a place to store their savings. Since saving is a huge part of budgeting, this is a very important step towards achieving fiscal responsibility.
3. Develop a Budget
It is important for children to learn to allocate their funds in a conscientious way. This means having long-term and short-term financial goals, shopping wisely, and allotting money for charity.
Provide your child with three labelled jars–savings, expenses, and charity. Explain what each of these means and work together to come up with an agreed-upon amount for each. The savings jar will be transferred to their bank account each week. The charity funds can go to a charity that your child has selected to sponsor.
The “expenses” money is to be used to purchase items that the child wants to buy. And just like your own paycheck, once it’s gone, it’s gone.
4. Lead by example.
Your child watches what you do more closely than you realize. That’s why it is imperative that you demonstrate financial responsibility, yourself. In fact, you are likely presented with significant teachable moments on a regular basis.
Bring your child along the next time you go grocery shopping. Ask them to use a calculator to keep a running total of how much you are spending, enlist them to find the best bargains by comparing unit prices, and make sure to show them how much brand names cost compared to generic.
Have them help you create a grocery list based on your family budget and the items that you already have in your fridge. You can even invite them to look through the flyers and collect coupons.
Create your own jars for collecting coin to save up for a special expense like a vacation. This will show them that adults also have to save their earnings to achieve goals.
Yes, financial know-how is one of the greatest gifts that you can bestow upon your child. So, grab those jars, make those labels, and let the budgeting begin.
What did you do to teach your child the value of a buck?
Kimberley Laws is a freelance writer and avid blogger. As a former banker and debt collector–a job that led to the consumption of far too many antacids– she has seen, firsthand, the results of poor money-handling. You can follow her neurotic and OCD ramblings at The Embiggens Project and Searching for Barry Weiss.
Images courtesy of photos.com.
Kimberley Laws is a regular contributor to HowDoYou.com and the author of two blogs, The Embiggens Project and Searching for Barry Weiss. A "Jill of all trades," she is a High School English Teacher and Certified Career Counselor with a background in makeup artistry, retail banking, and graphic design. She is also a scrapbooking, PEZ-collecting, car enthusiast who loves travelling and New York City.
Sep 25, 2013 1
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