Getting your kids involved with the household finances doesn’t mean they get to look through your bank accounts and decide on how to divide up savings for the month. The goal is to get your children to be financially literate, so they don’t turn eighteen and spend all of their money by the end of the week.
It’s good to talk to your kids about household spending and to let them handle money, even if they are really little. Try to teach them the following lessons about finances when they’re young, so they can grow up to be masters of money management.
Family budgeting with children
Money is not owed, it’s earned
Financial expert Dave Ramsay recommends that parents give their children commissions for completing tasks. Parents who want to teach kids about money can ask their kids to complete chores and then reward them financially for their efforts — it will be much better than offering them a weekly allowance for doing nothing at all.
Choose the amount of money earned and the type of chore based on their age, making the reward higher and the activity more challenging as they grow up. Children who are very young can do something simple like putting the toys that they’ve strewn on the floor away before bedtime.
“Wants” are not always “needs”
One of the most important financial lessons to teach your kids is that there is a difference between wants and needs — an intense longing for a brand-new toy is not the best reasoning for buying it, especially when there is a limited supply of money available. Every time they want to have something, encourage them to ask themselves if it is necessary for them to have. They might understand if you compare shopping to eating. Sometimes you will put a tasty treat on your plate because it looks good, not because you’re hungry and end up feeling worse for doing it.
If the family ever goes through a financial emergency and there is nothing in the budget that can take care of the surprise costs, you may need to turn to a company like MoneyKey for help. They offer personal loans without the typical red tape of a mainstream cash advance, so they can pay off urgent bills or repairs and return to normal faster. Parents who go through this can let their children know that this is a situation of necessity, showing them that certain payments take priority over others.
Save up your money for a goal
When they get worked up over a new toy, game or clothing item, go over the price with them. Calculate just how long they will have to put their money away until they can buy what they want. Week by week, you can encourage them to save up their cash and experience the joy of making their first big purchase.
The old-fashioned way to save money was to put a coin in the piggy bank, but some experts say the porcelain container hides the contents from view. A better way to teach your kids to save money is to replace that piggy bank with a shadow box so they can see their progress — you can also insert a visual incentive inside of the box, like a print ad of the item they want.
Another good tool is the simple mason jar because it’s see-through and easily accessible. Along with a jar for saving, some parents encourage their kids to follow the 3 jar approach so that they have separate stock-piles for spending money and giving money.
As the name suggests, it relies on three jars — or any other container that can hold change — wherein they divide their allowance equally. Each jar receives its own label and purpose, including:
- Spend: This jar holds all the money they wish to spend, using it on things like candy, Pokémon cards, or going to the movies.
- Save: This jar is for long-term goals. Any cash they put into this jar will go towards a bigger item, like a Nintendo Switch, or their future, like a school trip or college fund. If it grows big enough, transfer this money into a savings account at the bank.
- Share: This jar is to teach them charity and generosity. Any change they place in this jar will go towards a cause of their choice, whether it’s a local homeless shelter or a national campaign against climate change.
Sometimes, you need to sacrifice in order to save
You can use the household budget to get this message across, explaining that the family is going to cut down on expenses for a larger reason. They will learn that reaching a goal requires extra effort and restraint. Go to websites like MoneyKey to find money-saving tips and suggestions that they will easily understand.
Explain to your children why you’re browsing through money-saving tips. You don’t need to give them all the details—like how many payday loans you’ve used to make ends meet—but giving them some information why the family needs to make sacrifices might smooth over any resistance.
When they’re informed, they can get involved, too. If you spin the situation just right, you can make certain challenges feel more like a game than a sacrifice. You’ll find that there are lots of ways to reduce expenses that the kids can help with like cutting out coupons for shopping or packing lunches before school instead of buying food from the cafeteria.
Finally, don’t keep a topic like finances hidden from your kids because then you will be teaching them to follow suit when they’re older. They could be ashamed or stressed when money is tight or when they need an emergency payday loan, keeping their troubles a secret from you. Finances won’t always be a breeze for your kids but teaching them about the basics will stop them from being a burden.