Money makes the world go round. How we use it, spend it, or save it is critical to our existence. Our money attitudes and habits were learned at a young age by our parents, relatives, and friends. Later, from education and, finally, from life. But the basis of our relationship with money still lies in those formative years.
- speak about finances at home
- engage the entire family in the budgetary process
- overcome the scary-budget myth
- give allowances for accomplished work
- try the envelope-container system
- be negative
- dictate children’s goals
- make it too difficult
- be too strict
- expect too much
Children hear everything. They know when there are financial problems at home. They observe how parents solve these problems. Take the problem and make it into a positive solving experience. The details and numbers are not relevant to the children. It is identifying the situation and the options to resolve them that are important. Not only do the children realize that there are monetary options, but options can be used in other everyday situations.
A unified family is a happy family. It is so much easier to accomplish goals if there is a buy-in from the team—the family. Finances affect everyone. State the issue and ask for recommendations to be put on the table. Describe a budget in simple, positive terms, and why it is needed. State the benefits to the family as a whole and to each one individually. Let everyone suggest how they can contribute to keeping to the budget. Their individual achievements, contribute to the overall family budget in a positive way. Keep everyone informed on the progress. Reward them for goals achieved, no matter how small.
Sticking to a budget can be scary, confusing, challenging—yet fun—even for adults. Imagine what it can be like for children. So we need to make it fun. One way is to make it a game. Games can come with lots of complicated rules that take a long time to learn, so modify those game rules, especially for the younger children. Let them create some of their own rules as long as the goal is the same.
Allowances and bonuses are learning tools. A great way to teach children about money is to encourage them to work towards a goal, letting them earn money through that work, and teach them about saving a part of their earnings. They can earn bonuses for additional work, too. How much? That depends on age, the means of the parents, and the jobs the children do around the house and yard.
A visual and tactile budget system is excellent for children. This technique is simple: It allocates an allowance to several envelopes/containers. These envelopes are labeled for different expenses. These expenses will vary for each child. Expenses could be: candy, toys, books, gifts, and savings. Don’t forget savings for the really big items. Allocating expenses can teach them to count, use fractions, and percentages depending on their age. A major advantage of this technique is that it is a visual and tactile exercise. Children can see and physically count what is in each envelope or container. It also allows children to change the allocation by transferring amounts to other expenses. This re-allocation is the basis of a flexible budget.
Success requires no negatives. Parents’ attitudes about money are transferred to the kids. Can’t afford it; money doesn’t grow on trees—just a few negative answers to children’s requests. These are self-defeating expressions especially if heard continuously over the years. It translates to, “Why bother if there is no money or no way of achieving it.” If it is said often enough, it becomes a truism.
Children have their own ideas and goals. If they choose their own goals and then do not meet their goals, they will adjust their strategy. Talk to them. Help them analyze to formulate new goals. They will also watch their siblings’ and friends’ techniques and accomplishments. Let them make their own mistakes. That’s how we all learned, and some of us are still learning.
Helping your child develop financial responsibility should not be a math class. Yes, in the process of defining and implementing a budget, there is a lot of math, only they don’t realize it—and that’s the beauty. If it is too difficult for their level of understanding, they will turn it off. This should be financial responsibility by osmosis for children.
Timeframes are important, and unrealistic timeframes defeat the learning process. Remember that a budget is a flexible document. It even needs more flexibility for children. Children still need guidance and reminders of timeframes from parents. Should timeframes be daily? Weekly? Try timing it with their allowance. That’s often reasonable. Money is on their minds when receiving an allowance, which makes talking about the budget real and relevant to them.
Small steps over long periods breeds success. The concepts of saving and budgeting are more difficult to grasp for children. Have patience and keep encouraging. They will get it in time and surprise their parents.
We owe it to the next generation to understand how money works and how to save it, spend it, not fear it, and donate some of it. Most of all, remind your children that money does not guarantee happiness, and with a solid foundation for budgeting the money they earn, they will likely grow up to be financially responsible adults.