Teaching Budgeting to Children
Teaching budgeting to your children is one of the best things that you can do as a parent to help your children develop an understanding about handling money. Budgeting is a practical skill that everyone can use throughout their life so it is best that your kids learn about it as early as possible.
In teaching budgeting, one effective method is to set up a budget plan with three categories of spending - savings and/or investments, personal expenses, and charity-giving. This last category may also be changed into family/household budget.
Discuss with your children the value of saving and investing money and how these practices can grow their money. When teaching budgeting, it is best if you involve your children with the decision-making, especially when it comes to the third category. Let your child decide which charity to donate to and if he chose to spend a third of his earnings on helping the family instead, then offer suggestions but let him decide how he can help. For instance, he can help pay for some things needed in the house. This is a great way to make them see how money works in the real world.
Usually, a child or teen's earnings come from gifts or part-time jobs like babysitting so they do not have a regular source of income that would be ideal for the purpose of building the habit of budgeting. In teaching budgeting, it is best if your child has a fixed amount of money each month to budget so consider giving them an allowance. With an allowance, it would be easier for them to learn how to set goals, control their budget, and save money.
For instance, your son can budget his allowance to save for a new pair of jeans. He will know how it is to work towards a specific goal and then later on, he can use his budgeting skill as his goals become bigger such as a car, travel or college expenses.
Role modeling is the best way to teaching budgeting effectively. If you are not able to stick with the household budget, then you are unlikely to motivate your children to even set up one. Check your spending habits and make sure they are worth emulating. You should have savings of your own to encourage your children to do the same. By practicing what you preach, you can expect your children to do the same.
