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[Question] What should you consider when teaching your kids about budgets and saving?

Teaching children about finance, or anyone for that matter is a process that generally takes trial and error, and time. So preparing your child can never start too early.

To help them understand finance, particularly saving and budgets, simplify it down to the basics. Lead by example and provide relatable scenarios that will make it easier for your child to learn.

Here are some tips improve your child’s financial awareness and development:

Financial independence

To save, budget, or even spend money, they’ll first need a source of funds.

Children are very observant and learn from you, even when you aren’t intentionally teaching them. This includes your act of going to work and getting paid. Start by giving your child a weekly list of chores (a job), followed by an allowance (income). With this, you’ll create a  framework for them to learn within. If your child is already in their junior or senior high school or college years, they may already be employed and learning the lessons of what is involved in earning a living. Providing younger children with opportunities to earn and save will give them a better foundation for when they enter the work world.

Checking / Saving Accounts

When your child moves into his or her elementary years, consider opening a savings account just for them. This will provide them firsthand experience with banking. In doing so, don’t forget to help guide them on how to monitor the account balances, as well as how to put deposit and withdraw funds. If you want to begin even earlier, integrate the piggy bank model. Over time they’ll be able to identify how much money they want to save versus spend. This is an indirect path to understanding budgeting.

While developing your child’s financial knowledge, don’t forget to make the learning process fun. Organize family game nights. Integrating board games, such as the popular games Monopoly or Life, can be simple and fun ways for them to get acclimated.

An early scenario for teaching your child financial independence could also be a weekend trip to the movie theater. Instead of just paying for your the ticket, have them pay for themselves. If they want concessions, have them purchase their food and beverage. If they are short on funds and can’t buy concessions, express the importance of budgeting for future movies. This could be another opportunity to offer and teach them about loans by offering to pay for an item on the sole condition that you will be paid back within a certain time period.

Budgeting

Goal setting. Plain and simple. Plan. Plan. Plan.

Set specific, attainable, and timely goals with your child. The lesson of fixed spending will teach them to plan short and long-term, as well as identifying need versus want.

Trips to your grocery store are a perfect opportunity to show them planning in action.

Preparation. Before leaving for the store, create a grocery list (outlining needs). Place it on the refrigerator and allow your entire family to participate, including your child. Having this list will let you talk about what is really needed compared to what is wanted with items that they can really understand and relate to.  It could also assist in also creating a more nutritional diet for your entire family! And it illustrates the difference between necessary expenses and leisure spending.

Many parents can relate to taking a child to the grocery store and them wanting certain items. Use this opportunity to teach kids about the benefits of delayed gratification. Rather than buying the item or simply saying no, explain to your child that by not buying the cookies on impulse just because they sound good now, the entire family can do something even more fun later. For example, you could offer a dinner out on the weekend as something relatable and rewarding to your child.

Saving opportunities

Shopping for clothing or footwear can be another opportunity to teach savings lessons.

Speak with your child about what their needs are and be sure to review what items they already own to create a prioritized list. Perhaps they have outgrown shoes and pants, but last year’s shirts and jackets still fit and are in good condition, even If they aren’t the trendiest of items. Set a specific budget and while shopping, provide kids with options and remind them of the priorities you set before leaving the house.

Considering the purchase of used or non-premium brand products can also be a viable option. Bear in mind; new isn’t always best. In more instances than not, buying used products has no downside. Explain this to your child.

When grocery shopping, consider the use of bonus cards or memberships to increase your savings or earn other kinds of rewards like discounts on gas. Make sure your kids understand how smart choices on where you shop can contribute to saving money on other necessity items. In some store aisles, best deal products are often highlighted. Point out these shopping tips to your child. Perhaps they can join a membership rewards program with a gaming store they enjoy visiting. Coupons are also a valuable option. Have your child assist in cutting out coupons for grocery list items before your trip.

Bonus tip:  Plastic. Many adults have the impulse to use credit or debit cards. The convenience of pulling out the card instead of getting cash is very tempting, but it is harder to teach your kids about spending, budgeting and saving when there is no physical currency exchanging hands. Use of credit and debit cards can be a fast and slippery slope to buying items on credit and not have the funds to pay for them later when the bill shows up.

In conclusion, although you don’t need to check your spending, budget, and timeline every day, you should be constantly aware of your funds. Teach this to your child. Planning and preparation are fundamental elements for financial success.

How to go about improving your child’s financial awareness and development is entirely up to you. But leading by example and providing scenarios your child can relate to can be a very effective teaching tools. Finally, educate yourself. If you are reading this article, you are already moving in a positive direction. Learn from the experts and improve your own practices, which in turn can improve your child’s future financial practices.

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