Good budgeting skills are not something one is born with. Instead, they are taught to us as children and shown to us through example. In today’s society, many schools are not teaching finances and budgeting, so it is solely up to us as parents to instill those skills in our children. We need to teach them what money is, how money is earned and, most importantly, how to budget that money.
Like with everything regarding children, consistency is key when teaching small ones the importance of finances. Children can be taught to do chores as young as toddlers. Start with simple chores, such as picking up toys off the floor. By the time they are teenagers, they will have taken on more responsibilities around the home, such as mowing the lawn and helping with dinner. Doing chores teaches them the importance of hard work and earning money through an allowance. Once your child has earned their allowance, it is important to talk to them about saving a percentage of their allowance each week. Being consistent in enforcing chores and not giving an allowance until those chores are done, followed by making your child budget their funds, is an effective way to teach children and adolescents how to budget.
An important part of any budget is savings. Even as an adult, this can be a challenge. If we encourage savings from a young age, it will be easier to automatically set that money aside for a rainy day instead of spending it as soon as it is earned. Teach your child the art of savings from a young age by placing a portion of their allowance aside each pay period. As the child grows, you can even find ways to help them invest the money in different projects.
Money does not grow on trees, and sometimes we have to get creative to make our dollars stretch as far as possible. Teach kids to wait for sales or to shop garage sales or consignment stores when necessary. Children also can get thrifty by selling any of their unwanted items, such as old toys they have outgrown or video games they no longer play. Teach your child that if they receive a gift they don’t want it could have value to somebody else. Their ‘junk’ can be someone else’s treasure, and they can take that money and put it towards the item they have been saving for.
Sometimes there is just an item we think we cannot live without. Maybe the latest gaming console just arrived, or they want to go see their favorite artist in concert. Kids need to be taught there is nothing wrong with working harder to earn some extra cash when there are things they really want. It is a better alternative to placing the items on credit and living in debt. You can help to provide some extra money-making opportunities. The weekend is a great time to add in a few extra chores, such as raking leaves or mowing grandma’s yard.
Lead by Example
If your goal is for your child to grow up with excellent budgeting skills, the best thing you can do is lead by example. Make a budget, and stick to it while showing your child the importance of saving. Discuss budgeting openly, and don’t be afraid to tell them “No, we don’t have the money for that right now.” Teaching a child from early on the importance of budgeting and leading by example will set your child up for success. Budgeting and living within their means will make it much easier for your child to do the same down the road.
Of course, to be a really smart and savvy investor you need a solid foundation in math, and interest. For help with this, try our compound interest calculator!