Children, Money and Budgeting
One of the reasons that many people end up overspending, lacking savings and going into debt is because they were never taught how to manage money as a child. It may sound a little strange, but it’s true. The habits you pick up as a child often follow you throughout your life. In fact, a study from the University of Cambridge found that lifelong money habits are formed by the age of seven.
Therefore, it’s very important that you teach your children about budgeting and money management. There are different lessons that you can teach children of different ages. Obviously a three-year-old won’t be able to manage the family budget, but it doesn’t mean that he or she can’t learn about setting goals, saving and the importance of shopping with a list.
Teach Children how you Earn Money
Small children likely don’t understand how someone gets money. They may see you go to the bank or use a credit card and assume that money comes from the bank or the credit card company as it’s needed. A lesson that you can teach them is that you earn money by working.
Money is Finite
It’s important that you let your children know that money is finite and that, therefore, you need to make choices about what to do with it. Teach them that there are several choices, from spending your money as soon as you get it to saving it for a larger purchase to putting it away for a rainy day.
Talk to them while you Shop
When you’re shopping, let them help you compare prices, check off your shopping list, clip coupons and perform several other tasks. This will show them the importance of being organized when shopping.
Explain to them why you are buying some items and not buying others. If they want an item that’s not on the list, tell them that you are only going to buy items on the list. This will show them that impulse buys are not a smart decision.
Give them an Allowance and Let them Make Choices
Once your children understand the importance of making choices with money, let them do it for themselves. Give them a regular allowance and let them know that it will be up to them how to spend it. Encourage them to save some of their allowance for the future by letting them know the importance of saving. If they spend their money on something they don’t really want and this means that they can’t get something that is more important to them, they will understand what happens when you overspend. It’s a good lesson to learn young.
To help them make priorities, sit down and discuss all of the things they might want to purchase. Then have them write down the prices and place these potential purchases in order of preference. You’ll also want to help them understand that there are alternatives to the items they want that may be more cost-effective.
Let Older Children Help Budget
Once your kids get a bit older, they can help you prepare the weekly shopping list and even help make choices for the household budget. This will show them how important it is to plan in advance. They’ll also learn that keeping track of everything that is spent matters.
When you’re budgeting, explain why each item in the budget is important and don’t forget about savings. Little things like “We need to save $100 a month for the next year so that we can afford our vacation next summer” help them understand that saving now means more opportunities in the future. It also helps them see that everybody has goals, not just kids who get an allowance.
Pay Attention to your Own Attitude and Actions
Children watch everything. If they see you shopping without a list, not checking the price on something before you buy or using credit cards for all of your purchases, they’ll learn to do the same, regardless of what you’ve taught them. The best way to teach your kids how to manage money is to be a positive role model for them. Doing so could help you save more money yourself as well!