Teaching your children to save and budget early in life can help them a lot later in life. You provide your child with insulation from major mistakes later in life and this will have a positive impact on their quality of life later on. Essentially, you are providing building blocks to a greater future by learning to save for a rainy day.
You need to reinforce money lessons from a young age continually in order to make this possible. Teaching your child to live within a budget and sticking to only what they can afford and have saved for can go a long way in making important money spending decisions later in life.
Teaching Your Children to Budget
In order to do this effectively, a hands-on approach is required. For instance, your child should learn how to budget from a young age to foster responsible spending habits. Knowledge on spending wisely is similar to the precaution against use of drugs or the birds and bees speech. Therefore, budgeting knowledge is paramount.
Budgeting and Money
In order for your child to know about budgeting, it is essential to ensure that he or she is actively involved in financial decisions at home. However, this should be done at an appropriate age. Here are some of the ways to teach your child about budgeting.
Provide your child with an allowance
By giving your child an allowance, you are not spoiling your child; you are giving them knowledge on how to be responsible with money. You can tie the allowance to chores; this way, the child also learns from an early age that money is earned before it is spent.
For younger children, you can keep it simple by providing the three-jar method. One jar is for sharing, the second jar is for personal spending, and the third jar is for saving. You can use the three jars to monitor your child’s habits on spending and saving.
However, as the children are young the activities performed for each of the jars should be supervised in order for the child to learn effectively. Additionally, ensure that you make it a fun experience for the little child.
Once you provide your child with a regular allowance, he or she can learn how to budget for the money depending on how much you give them and how regular. Initially, you can teach them by asking them what they need to purchase.
In case what your child requires is $50, then you can give them a regular allowance of $10 per week until they have the amount required for the purchase. By so doing, your child learns how to save for what they need. Additionally, you can offer tips after chores are done and teach them how to save the tips received after doing chores for a rainy day.
However, it is not always good to tie allowance to chores that your children perform. The reason behind this is that your children will not manage to budget. As mentioned earlier, budgeting and managing money should be regularly reinforced in children. Therefore, ensure the allowance is provided even when they do not have chores so that they keep abreast of their saving and budgeting habits.
When is a more comprehensive budgeting plan needed for a child? Most likely when they go to college. You can download FREE a college budgeting worksheet to develop with your college student to manage college and living expenses. Please give this article a quick comment/share and then jump over to our money tools module for budgeting worksheets and plans.
As your children grow older, it is important to start including them in your home budgeting activities. You can also include them in your own financial decisions for the household. This helps them in making decisions that are more informed once they have left home and start living alone.
How to Get a Bank Account
Once saving and budgeting habits are formed and practiced well by your children, it is time to teach them the importance of having a bank account.
They have at this point saved enough to open up a bank account. You can give them tips on how different bank accounts operate in order for them to decide which bank account suits their current needs.
For instance, in case they are still in school, they may require a savings account. However, if they are working, they may need a current or checking account. Always remind them the importance of restricting their spending to less than what is available in their account balance. You can then visit the bank to get more information on the best bank account for your child.
In conclusion, the knowledge you give your child on financial literature at an early age is more substantial and important than any amount you can leave your child as inheritance. With the above information in budgeting, spending, and saving, your child is well on the way to a secure financial future.