Many kids go off to college and have no clue how to budget their money to get them through a week, month or even the entire school year. And once they graduate and start working, it’s a clumsy path of learning how to live on their own without putting themselves in debt.
I’ve always believed basic budgeting and money management should be a required class in high school and even college.
As parents, there are so many things we can do to introduce money management to our kids, even at a young age. Here are some tips to help guide you when talking to your kids about money:
Allow them to earn money
While many parents don’t like to pay their kids for basic household chores – me included – consider allowing “extra” chores or jobs they can do to earn money.
These would be tasks above and beyond the standard daily chores such as making the bed, emptying the dishwasher and walking the dog. One idea is to require them to do one “extra” chore each week, and they can pick from a jar or a list of the extra chores. These chores would have a set dollar amount attached to each one, so they are aware of how much they are earning before they even begin.
Here are some suggestions:
1. Clean all blinds in the house to earn $2.50.
2. Wash all windows from the inside only to earn $5.
3. Vacuum car to earn $2.
4. Wipe down all the floor molding in the house to earn $3.
5. Clean out and organize the pantry to earn $4.
Teach them how to set up a budget
Since they are starting to earn a small amount of money, they need to learn how to budget that money instead of just throwing it all in a jar. Teach them how to write a budget that shows where their money goes.
Since they don’t have bills, their budget would be very basic, but it’s a great way to show them the power of a budget and how it works.
Their budget should include line items for long-term savings (this would be best for a bank account), for spending (smaller purchases such as candy at the store, small toys, etc.) and one for long-term spending.
Long-term spending would include something they are saving for, such as a larger purchase of a toy, game, clothing item or even for spending on an upcoming family vacation. Make sure to sit down with them to discuss what they are saving for first, to be sure this is something you all agree on.
Each time they get paid, they would need to divide that money up into the proper sections. Long-term savings should be in a bank account; the other two can be in jars or envelopes they keep in their room.
If charity is important to you and your family, you should include that in the budget as well.
For example, if a child’s weekly earnings total $6.00, the budget could be as follows:
- Long-Term Savings $4.00
- Spending $.50
- Long-Term Spending: $1.00
- Charity: $.50
After one year, they would have $208 in savings, $52 toward their long-term spending, and $26 to donate to a charity they like. That doesn’t even include the extra spending money they had each week for little treats.
Lead by example
Talk openly with your kids about money. If you are saving for something yourself, let them know your progress. Once you finally do make the purchase, talk with them about how you got there. Did you cut back somewhere else in order to put money toward this item or vacation? If you decided not to purchase something or cut back on a vacation, let them know that too – and why.
Don’t be afraid to talk money to your kids. They don’t need to know how much you make. If they see you are saving toward an item or items or even an event or a vacation, it helps them to understand you must work toward something, instead of thinking you just get paid and buy whatever you want.
Money management is so important. The amount of money you make doesn’t determine how rich you are. What really determines how rich you are is how you spend the money you have.
So, start them young. Get them to understand they can have things they want and need if they plan and work toward them.