Many parents, especially those parents who have been in financial trouble themselves, want to teach their children about how to budget their money. The most important point to remember is that if you are teaching budgeting, you must allow your child to make the decision. Many parents have a hard time when they see their child spending all of their allowance on candy and gum when they will want a new toy the next day. You must allow your children to make mistakes with their money, though, so that they will learn to be responsible with their money.
There are many potential ways to teach your children about money. You will have to decide the one that works best for you. One common suggestion among financial minds is to teach about taxes using a taxing system in your home. Explain to your children that taxes provide education, research, roads, and many other necessities in modern life. Taxes are not “bad” in and of themselves, and that’s something that you should try to instill in your children. Have the entire family meet for a discussion of something the entire family would like. Make this decision through consensus or parental decision or whatever method works for your family. Then explain that everyone has to put a certain small percentage of everything he or she earns in the tax jar. Parents may choose to match the funds as you go, and then you will have a new item in the home that everyone can enjoy and that everyone helped purchase.
You also may want to teach your children about giving to charity as a way to budget their money for the benefit of others as well as themselves. If you are going to teach your children about monetary charitable donations, do so in a structured way. Sit down with your child and ask what charities he or she may want to help. Explain that the help can be strictly monetary – meaning that your child gives a donation – or a donation through goods, such as purchasing foods for the food drive or buying a coat for a drive for the homeless.
Once your child selects a charity, you can help him or her decide how much money to give. Your daughter may want to give a one-time donation at Christmas or another time, or she may want to give some money each month from her allowance. You should help your child decide and then remind her gently if needed that she has promised a certain portion of her money to the chosen charity.
There are additional financial lessons you can teach your child as well. If you give your child an allowance, help him or her to see how much various items cost. If your son wants to save up for a riding toy, help him to find out how many weeks he will need to save his money to get the chosen toy. You can show your child that while he may want to buy another small toy, that will cut into the money he has for the larger item.
If you have an older child, you may even want to show him or her how to use a ledger to record money coming in and out so that he or she will know how much is available at all times. Once your child saves $50 or more, then you should consider helping her open a savings account. The money will be safe, will earn a little interest, and your child will have to think about using the money before going to the bank to get it.
These few, simple lessons can help you to teach your child about beginning his or her financial future. If you work hard at an early age, then you may be able to give your child a valuable head start in the financial world.