Importance of Budgeting
Budgeting allows you to create a spending plan for your money coming in and out. It makes sure you have enough money to cover essential bills and things that are important to you. Although your children aren’t necessarily contributing to utility bills or groceries, they will eventually face their own financial responsibilities. By the time your child graduates college, they can end up with an average of $29,200 in student debt. Teaching your kids how to budget from a young age can help them become more responsible and confident handling money.
In addition, teaching your kids how to budget can help them build an appreciation for the value of money and your hard work earning it. Money brings food on the table and can buy fun days out for both you and your kids to enjoy. But, a lack of money can also take all of that away. If children don’t understand where money comes from and where it goes, they won’t appreciate how much responsibility comes with money management. By being transparent with your kids and answering questions they have about money, you help build their appreciation for what they have and how much work you do.
Teaching Children How to Budget
- Start by setting small examples: The last thing you want to do is scare your kids about the dangers of money. Why not get them involved with little transactions to set and example and build their confidence with money handling. This can be as simple as cutting out coupons together or teaching them how conserving energy can significantly lower the household’s Scana Energy utility bills.
- Chores and time management: Encouraging your child to help around the house with chores instantly teaches them a sense of responsibility, which can be transferred when taking care of their own finances later in life. The younger your child is, the smaller but still important the chore can be, for example, cleaning their toys or putting them away. The quicker they complete their tasks, the more time they also have to enjoy playing with their toys.
- Budgeting and school work: Comparing budgeting and school can be a great way to start encouraging responsible money saving habits and improve their performance in school. Teach them how spending money is like playing with their toys. If your child is spending all their time playing, they won’t have any money left over.
Teaching Children How to Save
Children may not fully understand how income tax works or compound interest, so it’s best to start small when teaching kids how to save money at a young age.
Simple budgeting concepts can begin with encouraging them to save a portion of money they receive as a gift or as part of their allowance. Giving them a piggy bank or even setting up a child’s savings account will allow them to practice saving and see how their savings can grow over time.
Putting money aside for philanthropy is also very important in building your child’s character. Discuss what’s important to your child and what they may be grateful for. Then, why not encourage your child to use some of their money to donate to charity for something they value, but know other kids may not have. The sooner your child understands money doesn’t grow on trees, the more likely they’ll want to budget and be more appreciative of what they have.
Conclusion As a parent, there are many life skills you intentionally and unintentionally teach your children. By actively teaching your child money saving habits from a young age, you make sure they’re prepared for the difficult decisions they’ll eventually have to make as they start growing up and making their own decisions. And, you may teach yourself about your budgeting skills along the way.