Teaching your kids to budget is paramount to raising financially literate adults. Most adults who make the wisest financial decisions these days have attributed their sound choices to lessons they learned growing up.
Therefore, an essential part of your kids’ education is financial literacy. There is, in fact, no age limit to this as you should begin your teaching the minute that they understand the concept of money. It is one of the the most essential money lessons that your kids should know about.
Kids are very impressionable so you can be certain that whatever they learn at a young age is what they would carry into adulthood. To teach your kids budgeting, and have them actually learn, here are some tips to go with.
- Help them understand why they need to learn to budget
First off, you need to help your kids understand the need for budgeting. They need to know why they need a budget and all of the pros of living by one. However, you also need to keep in mind that they are kids so that you know how to proceed with them.
Budgets require discipline because surveys show that only one out of three households adhere to a strict budget. By budgeting, you are helping them learn a habit that would pay off in the long run.
Budgeters rarely ever experience any financial issues as compared to people who just spend on a whim. Also, they are a lot more disciplined in other aspects given that budgeting takes quite a lot of discipline to go through with.
Furthermore, it aids keeping on track in terms of various financial goals that one might have. Giving them such life lessons at a very young age can only do them a whole world of good.
- Lead by example
More often than not, kids end up doing the same things that they have watched their parents do over and over. So if you want to teach your kids to budget, you have to walk the talk yourself. First off, you have to make wise and informed financial decisions and ensure that you keep them informed.
Budgeting typically involves listing the items out and attaching your proposed expenditure per item using a scale of preference. When they see you do this, they are invariably learning and eventually it would manifest.
Similarly, ensure that you sit them down and they make their own budgets irrespective of how trivial their purchases may be. This way, you are helping them inculcate a habit necessary for financial success.
- Help them understand the difference between wants and needs
Before they even begin to learn about budgeting itself, they must first understand the need to budget. This is where differentiating between wants and needs comes in. In order to allocate cash properly, they need to identify what they need and the things that can come after.
When you help them learn this, you unlock and develop their decision-making mechanism or thought process as well. Help them understand that needs include the basic necessities of life such as food, clothing, and shelter and after taking care of that, they can begin to apportion cash for their wants.
Also, you can easily use your budget to explain this concept to them and have them understand why it is so. All of these and more make for a financially literate kid and subsequently, adult.
- Let them begin to earn at a very young age
Your kids would definitely be needing some money if you are going to have them learn practical budgeting. So in order to teach them and help them gain practical experience, you need to have them earning at a very young age.
What can they get paid for? Well, you can pay them for extra chores that they do or you can have them carry out minor activities in the house in exchange for payment. Also, giving them a fixed allowance every week and then teaching them how to rank their purchases would work as well.
In summary, the best way to get this message to become part and parcel of them is if they can work with their own money. They could allocate a portion to candy, another to ice cream and even toys.
The items that they want to purchase do not matter so much as the lessons that they are taking out of it.
- Help them inculcate the habit of saving
Believe it or not, saving is an integral part of budgeting and vice versa. Therefore, if you want your kids to have a great budgeting habit, you have to teach them to save. A major part of any budget is the portion of income allocated to savings, and it is this way for many reasons.
First off, a need to save may be reason enough to budget. In order to determine how would be left to save, budgeting has to come first.
When your kids begin to earn, help them cultivate a saving culture while ensuring that they have a budget to guide them on exactly how much they would have left to save after taking all their expenses out.
In summary, helping your kids become financially literate is integral to their general development. Financial literacy is an area that your kids need to be very familiar with. Therefore, bringing up from childhood on this path is a great way to go.
- They’ll need your advice forever
Once they grow up and start with their full-time jobs, teach them how to get some side gigs and work with their own clients directly. The first contact is an important factor for their future business needs if they’re striving to be really successful. Kids don’t usually think about payroll, invoicing, and credit scores at the beginning of their careers. They only think about raw money, living on their own, and looking great!
Help them hit that road the correct way 🙂
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