How to teach my child to budget their money wisely?
“Money is a terrible master but an excellent servant.” – P.T. Barnum
With the recent lunar new year, our children might have received some red packets from their elders. What do they do with the extra cash that they’ve received?
Well, teaching children to budget their money wisely is essential for them to be financially responsible in the future. It is important for children to start learning about the value of money from a young age. It is a skill that they will need to know in order to be able to manage their own money. In this article, we have talked about how to teach your child to budget their money wisely and some basic steps you can take to do so.
Steps to help your children:
Talk to them about the value of money
Young children might not understand the fact that money is limited. They might have an impression that you will give money whenever they ask you. Elder children might already understand this but talk to them so they appreciate whatever money they get. When they understand that it is hard-earned money they are handling, they will be more careful while spending it.
Give them an allowance
The best way to teach your children how to handle money would be a hands-on approach. Give them an allowance and ask them to manage their expenses within that budget. You can sit down and discuss with your child and plan how much to give them on a weekly or monthly basis.
Keep the allowance amount fixed
Do not give them more money unless you feel it is necessary. A fixed amount every month will help them plan and be careful of their expenses. If they think that they can just get more money from you whenever necessary, they won’t be careful with their spending.
Show them how
Take some time to sit down with your child and educate them on how they can learn to budget their allowance. You can buy them a spending journal or even use one of the many apps available online. In the case of young children, it would be better to start with a spending journal. Show them how to calculate and plan for different expenses and to set aside some money for any unexpected expense that might come their way.
Start small
Start by giving weekly allowances and see how that goes. Encourage them to share their experience and any issues they come across and slowly you can increase their allowance once they understand the value of spending money wisely.
Create opportunities for them to make decisions
If you are making all payments on their behalf, they won’t learn how to manage their money and budget. So, whenever there is a chance, let them make the payments and purchases on their own. For example, when there is a gathering or party at home, you can enlist help from your children on planning it. Tell them how much you are willing to spend and let them make a budget based on it. Take them with you for shopping and let them plan what all and how much to buy with the amount you have. Just monitor them and only interfere if it is necessary.
Show them how to save
When they start budgeting, show them how to save excess money after all the expenses. Teach them how to grow this habit of saving money for unexpected or future expenses.
Include them in your household budgeting
When you are planning for your household expenses, involve your children to partake. Tell them how much money you need to meet the expenses every month and how you are dividing the money you have on various expenses. Encourage them to make suggestions on how you can save money.
Ask them to keep tabs on their money
Keeping tabs on the money spent is as important as budgeting. Ask them to keep tabs on every penny they spend. Review it at the end of every month with them and discuss where they are making unnecessary expenses and how to budget more efficiently.
Start a bank account for them
When they are old enough, start a savings account for them and show them how to operate and handle it.
Offer them ways to earn extra
Sometimes their allowance money might not be enough to cover their expenses. Especially during vacation time or holidays when they have additional expenses, they might need more than the allowance you provide them. So, it is a good idea to teach your children ways to earn money the right way and supplement their income. If they are old enough, encourage them to get a part-time job. You can also pay them to do additional chores or tasks around the house. Teach them how to use it to better plan their expenses and integrate it into their budget.
Set savings goals
Set some saving goals for every month. If they can achieve it, reward your children. It can incentivise your children to spend more wisely and get rid of any unnecessary expenses they usually do.
We hope these tips prove useful to you. Happy budgeting! 🙂
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