How to Teach Children to Budget
It's important to teach children how to budget their money, whether they receive an allowance or earn money elsewhere. Learning how to manage money at an early age can help your children to avoid money problems as young adults. Once you determine when your children are ready to learn the basics of budgeting, how much to explain, and how much detail you can include, you can move on and teach your high school children to use credit responsibly.
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Instructions
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Decide what age you want your children to be when you start to work with them on budgeting money. Include the question of how much to save, how much to spend on necessities and how much to spend on "extras." Have a specific "lesson plan" in mind when you sit down with your children. Decide ahead of time if you will be opening savings accounts for each of your children, as this will impact a future step.
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Gather the needed materials, such as a simple calculator, pencils, paper and play money. Pick a time when your children won't be distracted and turn off the computer, video games and television. Make your discussion interesting and fun so your children will be more likely to give you their full attention.
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Give each child a pencil and paper. Count out and give each child a "sum" of play money. Have them count their money and write the total at the top of their paper. Tell them to write what they think they should save, what they think they should devote to necessities and what they think they need for "extras." Don't be too surprised if you find that the amount for extras is higher than those for savings and necessities. Ask them to count what they've put into "savings," "necessities" and "extras."
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Show your children a simplified version of your own family budget. Using play money, show them how much you set aside for necessities, savings and extras. Mention that necessities include small school supplies bought at the school store, supplies for school electives such as art or music, and lunch money. Equate "extras" with "I want" rather than "I need." Stress the benefits of putting money into savings.
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Give your children registers for their savings accounts, if you decide to open accounts, and show them how to write down deposits and withdrawals. Let them know you expect them to make more deposits than withdrawals. Show them how to add, subtract and keep a running total of their savings, and teach them how to keep track of their accounts online, if that option is available.
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Give your children additional responsibilities for deciding what they will spend their money on as they get older. If they make a budgeting mistake, don't rescue them with additional cash. Let them handle the consequences of the error on their own.
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Use school-related gifts such as yearbooks or class rings to teach your children about budgeting. Explain to your child that he needs to select something he can afford and budget for it. If you decide it would be a good motivator, you can provide a small sum to help, but make it clear to your child that he will have to save the difference on his own. Help him to make sure he's staying on track by paying attention to the ordering deadlines established by the school's vendor.
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Teach your high school child about using credit responsibly. Explain how credit works and how banks and credit card companies extend credit to customers.
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Discuss the possibility of putting your child on your credit card, but make sure to warn her that she has to stay within a specific budget. Go over your monthly statements with her to see how she is complying with your credit budget. Have her pay her portion monthly out of her "necessities" budget. If she does go over, she is responsible for the overage--not you.
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Tips & Warnings
Monitor your children's saving and spending activity closely.
Don't routinely rescue your children if they go over budget. They won't learn how to save if you help them out. Warn your children about identity theft and don't allow them to leave their account information out in the open.
