Budget Financing Children Parenting

Teaching young children about finances can be a difficult task. Sometimes they just don’t understand why you can’t afford to buy them everything they want or why you don’t have more money. Their undeveloped minds don’t always grasp the fact that money doesn’t grow on trees. For very young children, it’s necessary to let them grow up a little before teaching them about money. For older children, however, who are capable of math, logic and understanding concepts concerning finances, it is possible to teach them the value of a dollar. School age is a good age to begin teaching children about finances and budgeting their money effectively.

The first step is to sit down with your children at the beginning of the month and help them create their own budget. Once your child grasps these ideas, you won’t have to do this every month, but coming up with a budget until they do get the idea, can help you teach them about money. List the essentials they will need throughout the month such as food, clothing, and school supplies. Also include things such as gas to get them to school, money they may need for extracurricular activities, and money for the Internet, phone, TV, or other privileges you pay for. Include everything that is in your own budget related to your children. Determine how much it will cost and give them that amount using pretend money. Tell them they have exactly enough for these items.

 In order to get extra money, inform your children that they must do chores or other activities to help you out. Give them a set amount for chores. Make it a reasonable amount. For example, if a chore takes them 10 minutes, it’s probably not worth $20. You could even pay them by the hour so they understand how hard you work to afford the things they want.

Every time your children need something that requires money, have them give you the amount it costs so they deduct it from the money you gave them. When you buy groceries,  let your children help you decide what healthy foods to buy. They won’t have to pay for these foods, but if they want something that’s not on the list, tell them they must give you some of their money. If they see a toy they want at the mall, or ask to go to the movies, do the same. If they have extra money because they completed enough chores, you can reward them. However, make sure you don’t overpay them for these chores. This will make them understand that you must work hard for your money and money doesn’t always go as far as you want it to.

Teach your children that if they want something special that costs money they don’t have, they have to make decisions. Is it more important to get that new toy or buy equipment so they can be on the soccer team? Is that extra trip to McDonalds worth giving up the TV for the night?  They can get a new video game, but if something comes up later in the month, such as a birthday party or a camping trip with a friend, they won’t be able to go. This will teach them how to make educational decisions concerning money and to think ahead about other possibilities that would be a better use of their money.

You can also introduce them to the concept of credit. If they ask you for something and they don’t have the money, give them the money if they promise to help you out with putting away groceries, feeding the dog, or washing the dishes. If they refuse to do the chores later, take away something their money would have gone towards, like the TV. That new video game has no use without a TV. This will teach their children that if they are unable to repay their debts, there are consequences and it’s the same for adults. If they don’t have enough money to pay the TV bill because you spent it on something unnecessary, the TV will be turned off. 

Of course if your child makes a bad decision, you can’t take away food, turn off the heat or refuse to use gas to drive them to school. That would be cruel and irresponsible. But you can show them that sometimes adults have to make choices and they can’t afford to buy whatever they want.

To understand how to save money, buy your children a piggy bank or even open a bank account for them. This will make them feel special, show them how much you care, and at the same time, teach them that when they make sacrifices and save their money, they will be rewarded. There are necessities, but they need to understand the difference between necessities and items they don’t really need to be happy. Without junk food and toys, they may even become healthier. They will have more time to play outside and learn about eating healthy food.  Most likely, they will also be happier and enjoy life more without superficial or unnecessary things.

It is not up to your children to worry about finances. That’s for adults to handle. But they should be introduced to budgeting their money and realize that your money is not unlimited. Don’t complain about not having enough money to pay the bills or do anything that will cause them to become stressed. It is children’s job to have fun and enjoy their childhood because it passes too quickly. However, it is for their own benefit that you teach them how to spend their money wisely. This can also teach them the value of family and that as long as you have a loving family, a roof over your head and food to eat, material things aren’t all that important.