It is our obligation to teach about how a children budget works and also how money works in this society. If you start your children at an earlier age, they will better understand how it works and will be wise with what they do with their money. We start educating our kids from the time they start pointing at things (about 9 months old) if they are allow to have what they want. The reason being that at the end of the day, we are responsible for their well-being. By the time kids reach two years of age they are renown for the “terrible twos” because tantrums usually get them what they want (if we give in to them) or they have learnt the very important word “NO” from us.
Kids from such a young age have figure out how to get what they want and understand what their parents won’t give them, I think it is only wise of us as parents to not ignore our kids potential to understand money and how it works in our everyday life.
The usual saying “One dollar for every age” is the general guideline for pocket money, For a children budget, it doesn’t need to be very complex. They don’t have bills to pay so up to the age of around 11, kids budget is focusing on what they receive and what they do with it. From the time they are at school it would be wise to have a children budget drawn up for them. During this time parents should consider encouraging their children to save. Teaching children about saving is critical for later life. We as adults are so busy focusing on paying the bills we ourselves don’t always prioritize savings. The rich men in the world will always tell you “pay yourself first”. A simple principle of paying yourself first, if applied early in life will lead to great success for your child.
Budgeting for kids should be implemented in a way that is visually attractive to the kids with lots of color and pictures, and of course fun doing it. Make sure your kids get to design the layout of the budget with grids for the days of the week and money descriptions with pictures for example a piggy bank for savings, picture of mum and dad for the allowance, books, toys, food, gifts and donations.
The savings component for a kids budget should be around 10% of the kids pocket money. You can also take your kids shopping for a piggy bank. Encourage them to put 10% into the piggy bank first when you give them their allowance for the week. Before you give them the next week’s allowance encourage them to put in the remaining unused cash they have before the next week’s allowance is given. This will teach them about living within their means. When the month is about to end, you and your child can count the savings together and then go to the bank and deposit the savings there. This will start teaching them about the power of compound interest and it will make them want to save more of their money into the bank.
During meal time speak about how your child has decided to use their money and also the topic of budgeting for kids. Always offer positive encouragement when your child has made a poor decision. If they bought more candy with their money and ended up with a tummy ache, explain to them to think about this experience before they choose to repeat the process. Alternatively if they saw a toy they wanted to buy but have come short in cash because they used their money for something else, teach them about patience and have them wait for their next allowance. It’s not wise to pull out extra cash to buy them something they want straight away as this teaches them nothing about responsibility.
During special times in the year you may want to encourage your child to save more, for example Christmas and birthdays. A month prior you may encourage your child to save by matching their savings or doubling it. This can be an attractive draw card for them when they know they have more to gain than the afternoon snack that week.
Wise parenting involves teaching our kids about money. Budgeting for kids is a vital role in the health of their financial future.
Kids learning about money should be enjoyable and make sure you set goals for them. Teaching kids should be a fun activity. Come to our website for more information.