As adults, most of us receive some sort of regular payment be it a salary, pension or another form of benefit and in order for us to ensure that we have enough to live on from one payment to the next, we have to budget. This is an important skill to pass onto children although it can be hard because often their experience of money is that it comes out of a hole in the wall and you simply go and ask for more whenever you want it. Alternately, for those children of parents who purchase everything on credit cards or buy everything online from gifts to groceries, they may not see actual cash all that often.
To help children understand the value of money and to budget accordingly, here are a few tips:
Let your child experience the relationship between work and money.
One of the best ways to do this is to provide an allowance. The allowance could be given to them in a combination of notes and coins to teach them how to handle different sums of money – this also allows them to immediately put a portion aside for saving.
You may decide to create a chart with a list of chores plus the relevant pay rate for each chore as it can help to motivate a child when they understand that money is directly tied to the work they do. Whether you then choose to award pocket money only for the chores completed or even start off with a base amount to give your child and deduct a relevant portion of this for chores not completed is up to you.
For some families however, the idea of paying for chores is somewhat controversial as it is felt that children should complete chores not for additional compensation but to contribute to the household. A compromise for this philosophy is to establish a minimum level of chores required for the household contribution (putting toys away, setting the table etc) and anything your child does that goes “above and beyond” their normal duties is rewarded with pay.
Establish the Three Money Jars.
It is important to provide your child with a place to actually put their money such as a piggy bank or a bank account or perhaps both. Another suggestion is the Three Money Jars option where you have your child divide any cash they receive between three jars set up for Saving, Spending and Sharing. Help your child to apportion their money accordingly but also help them to understand that they will need to save for something they really want such as a computer game or toy. Let them know that they should keep some money aside to spend on immediate expenses such as an ice cream or candy and teach them that they should always put aside a portion of their wealth to share. It is important that your child decide the cause with which they are sharing their money and this might be a tithe at church, a donation to an animal shelter or giving it to the Salvation Army or the homeless.
Get help with the shopping.
Another useful aid to teach your kids about the value of money and budgeting is your regular grocery shop. For older children, you might decide to send them to the shops with a fixed sum of money. You can tell them that they need to buy everything on your list but that they can save any money left over. They will then need to consider brands, bulk buying and perhaps even where to shop.
For younger children, you might want to give them some cash at the checkout and let them pay for small expenses asking them to check that they receive the right change at the end. You can also ask them to help you shop for cheaper items by keeping an eye out for coupons and advertisements or looking at the shelf labels to identify the cheapest price per quantity of the item in question.
One of the most important things when teaching your children about the value of money and budgets is to be a role model for them. Include them in discussions, invite them to understand and teach them the value of working (and perhaps also waiting) for what they want.