Have you ever noticed that kids think that money just appears magically? The truth is that kids does not worry about or thinks about such things as paychecks, bank statements, and even bills. They feel that them kind of worries are the parents’ responsibility. That is very true but not talking to your kids about those kind of things will eventually lead your kids to possible financial ruin.
However, teaching your kids about monthly budgets will help them understand how money works, how savings work and how to track their monthly expenses. It does not have to be for every finance that you have, just help them understand how to be financially responsible. All it takes is some basic steps to get your child on the right track for financial freedom.
To help children manage their budget, it requires three types of information:
Income: This is how much the kids get from allowance, birthdays, and from Christmas
Spending habits: This defines what the kids spend their money on.
Goals: What they hope to get with their money and how much that they should save.
Once you have this information, then you can start helping and teaching your kids to how to spend and how to save their money with a few simple tips.
Total up their yearly income
The kids’ yearly income is money from allowance, birthday money and Christmas money. When the total is figured up the kids and parents will be surprised at how money is at the kids’ disposal per month. Suppose a child gets an allowance of $5.00 for 52 weeks that is a total of $260. Now figure out how much they get from their birthday money and Christmas money. Suppose this is $20 for each holiday. Okay, the total yearly income for this child is $300. Once this total is tallied, the kids can see just how much money is at their disposal. That is not a lot to adults (some adults make that in one week) but to kids it is considered a fortune.
How they spend their money
Create a graph that shows kids how much they spend. Write down all of their habits that they enjoy (music, games, etc.) and then write down the cost of each CD or video game. Help them keep track of their expenses for 4 weeks and then divide the average by 4 and that is the average spending per week.
Set some goals
Once the previous two teachings are learned then help the child set some goals. For instance, if the child sees a new bike that they want but it costs $150. Show them how to start saving to get that new bike or make some kind of deal. Let’s say that you tell them that you will meet them half way if they save up their money to come up with their half. We will use the $300 yearly budget. That is an average of $25.00 a month for their spending/saving budget. Show them to save about $10 a month for that new bike. It will only take about 8 months to save up for that bike. That will leave them with $15 a month for their spending pleasure.
Now you have set them up on a budget. But how do you help them stick to the budget? A child as young as five years old can help clip coupons, compare prices and even shop the sales flyers for their favorite items. Have a special jar that the kids to put some money in for family outings. This way they have their own spending money to buy their own souvenirs. A month to month ledger should be kept to ensure that the kids does not over spend their monthly allotment. If they have some money left over at the end of the year have them decide how to spend it as they choose.
These strategies take a little time and a lot of patience. In the end, you are teaching your kids a valuable lesson about money. Once they get this monthly budget down, sit back and watch them become savvy consumers.