Pt 2: Teaching Kids to Budget
It’s a pretty scary thing to assume that kids these days understand the concept of budgeting. The simple fact is to have a successful budget, what income comes in needs to be more that what is spent and goes out… Basic right? Well it isn’t so simple anymore and has become harder to track…
Unsplash - Kelly Sikkema
We live in a world of electronic transfers which just happen and are easy to forget about if you are not on top of your comings and goings within your account. I mean who carries cash these days? The ‘tap’ society that we live in leaves children unaware of how much things cost. Unless you discuss it with your child every time you ‘tap’ your card, they become desensitised to spending money. The ‘tap’ becomes this free-flowing money stream that kids don’t grasp the full understanding of the implications of what each ‘tap’ may do to the ‘tappers’ bank account. We are a little too free to ‘tap’ in front of our kids…
So where does that leave our kids? I have seen some really basic measures that can be put in place to help kids understand the value of money and how to budget, the problem with them is that they take preparation and commitment by you as the parent to ensure their success.
A big tip to instill good budgeting and savings habits with kids is to begin with letting your children earn their money. This can be taught from a very young age, a list of expectations (chores) is discussed and agreed upon with your child. For example my kids started by simply clearing the dinner table and taking everything to the sink, given my kitchen table is in the middle of my kitchen it was not a hard task so they began young, at about 4 years old they were taught to pop their plate in the sink, that was a job! For this they were rewarded with pocket money.
Other jobs that my kids have progressed to are;
Feeding the cat
Making their beds (this is not so successful with one of my kids but I preserve with it!)
Putting the washing in the machine and helping hang it out when its clean
Emptying a clean dishwasher
Now you might think that I have it made, kids that do the washing and look after the cat, and truth be told its not too bad a life (😊) however I do pay for it. My kids get $10 per week pocket money, and its worth every cent! Once they earn money they can start to understand value.
I have heard many things about how to teach kids at this time to understand money but the best way I have found is to put half in their bank account each week, we go into the bank usually and deposit the money. The other half goes into their purse at home. To save for something. We have regularly had the conversation at the shops when they want to spend their money if what they are buying is good value and if they save their money then they can possibly get something that is better. Unfortunately having a conversation with a child about instant gratification vs holding out to get something better is a very hard one.
The big thing to discuss with your kids is how to understand the difference between wanting something and needing something. For example the toy they want to buy, they do not have to have it but they want it, whereas they need to have lunch for school. Have the conversation about what your budget looks like, discussing things like how you allocated your money is a great way to help them understand. This is things like saying, I work 5 days a week and I allocate 20% of my income to buy groceries and consumables. This means that 1 day a week of work goes to pay groceries. This is something tangible that kids can understand.
Many people use clear money jars so they kids can see the amount going into their savings, in my opinion this is only good if you are using coins not notes. This is a very successful way of teaching kids, but you must be organised to have coins on you each week at the allotted pay day and make sure you are prepared to have a routine around it.
The other thing we check regularly and mark in a chart is the balance of the kids bank accounts. This is so important that they can see their savings grow. It also gives them ownership on their savings. Its always exciting to sit with the kids and check their balances. We usually do this on ‘pay day’, it just affirms the benefits of their saving.
The one thing I find to be very frustrating in this age is all the technology which makes our lives easier it also manages to make it very hard to teach our kids. The biggest tip I can give you is to talk, talk, talk, instead of just tap, tap, tap!
Look out for my next blog post which talks about talking to teenagers and young adults about the pluses and minuses of buy now pay later schemes and the things to consider before entering into one.
Please look out for our next blog post which discusses how to ‘Teaching young adults about the perils of Buy now pay later schemes’ or email email@example.com if you want to discuss further.
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