Budgeting is all about preserving resources until a time when they’re most needed. But if you have children, you know that kids don’t think like this. For them, life is now-or-never: you get what you want as soon as you can and what happens in the future is anyone’s guess.
This disconnect between present and future makes it difficult for young children to pace themselves. When your full focus is on the magical moment of now, it’s difficult to feel motivated by potential outcomes in the future. Even though half of all adults in America are married, your little one isn’t going to be thinking about how they’ll need a healthy savings account to help build a family with their future spouse.
As blissful as living in the moment may be, your children will need to learn to sacrifice what they want now for what they want most if they’re to live well in the future.
To help them develop this way of thinking, you should start teaching your kids how to understand and work with money early. Your 10-year-old doesn’t need a course in accounting to understand money, though. To kickstart your children’s financial education successfully, keep reading.
Establishing a Relationship Between Work and Money
Your children have most likely seen you withdraw money through an ATM before, but they probably don’t notice you receive your paycheck after being at work every day. Whether they’re conscious of the assumption or not, your kids could get the wrong idea about where money comes from. If they think that money comes from the bank, with no connection to the effort and hours that get exchanged for your income, it will be hard for them to take the idea of preserving money seriously.
To make budgeting make sense, you’ve got to help your children understand where money really comes from and how it’s earned. But it’s not enough just to tell them. For their first eight years, children learn primarily through imitation, repetition, songs, and games. This means that the best way to teach your kids where money really comes from is to repeatedly show them.
Try to give them experience with earning money by giving them certain tasks to complete around the home that they can be paid for. If you believe your children should do chores without being paid as a contribution to the family, then consider giving them a baseline of chores that they have to do, such as keeping their bedrooms straight and the garbage can empty. Then offer a few tasks above this baseline that are optional for them and that they get paid for doing, such as cleaning up the garage or simple home maintenance.
Once your kids have their own “income” to work with, learning to work with money will make a lot more sense.
Help Your Children Organize Their Money
At a basic level, budgeting simply means setting money aside for different specific expenses and goals. Adults deal with a lot of distractions and responsibilities for their finances, from making mortgage and utility payments every month to paying for niche interests and solutions like hair restoration and styling — 75% of men with hair loss believe it makes them look older and 88% of women say that their hair directly affects their confidence. People can spend thousands of dollars every year in the pursuit of making themselves look exactly like what they’ve always dreamed of.
Obviously, children don’t deal with problems like this and they shouldn’t have to. You can keep the lights on in your house and pay for their haircut appointments. But when they have money of their own to do something with, you should help them think about ways they want to use their money.
To start with, you could help your children understand the concept of having financial goals and saving money for them. Don’t make it all about college or a future car payment, either. To make these lessons interesting and relatable, use things your kids understand. If your child loves video games or has a niche hobby, you can ask them about a high-cost item that they’d really like to have. Based on how much money they tend to make in a month, help them visualize how long it would take them to afford that purchase if they saved all their money for it.
You should also coach your children on the importance of giving to those in need. There are spiritual and motivational books written for children about how giving not only impacts the world but affects us for the better as well.
Finally, it’s important to remember that even adults need to let loose and spend like a kid once in a while. Make allowances for occasional spending on small purchases like candy bars or collectibles. Even spending larger amounts on products or services that make you feel good, such as a session with a chiropractor or massage therapist, is allowable. You don’t want to teach your child that spending money on “unnecessary” things is shameful or wrong, or else they may develop a fearful relationship with money. Instead, you can teach them that proper budgeting is what allows for these special treats
Use three jars that your child can keep their money in: one jar for saving for future purchases, one jar for giving money away, and another for spending money that they can use whenever they like. Then whenever your child earns some money, help them divide it wisely between the three jars.
Guide Your Children’s Spending
Once your child has their own money that they’ve earned fairly themselves, it’s important to respect what they want to do with it as much as you reasonably can. Another important lesson for adulthood is that when you’ve earned something fairly, you have a right to decide what you do with it. However, it’s also important to learn to manage your property wisely.
To help your children take responsibility for their savings and spending, give them the responsibility of paying for certain things they want to have. Obviously, you’ll cover more grownup expenses, such as groceries and doctor visits, which should occur once each year. But if they want anything extra, such as a new video game or electronic, encourage them to save money for it and buy it for themselves.
You can also coach your children in wise spending by teaching them to avoid impulse buys and compare prices. About 71% of online shoppers feel they can find better deals online and your children should know that it’s wise to compare pricing at different sources before making a big purchase.
By following these steps, you should be well on your way to teaching your kids to budget their money. Hopefully you’ve taken at least a few ideas from this to help you prepare your children for a prosperous, functional financial future.