Teach Children How and Why to Budget
The word “budget” has an image problem. Most people view budgeting as a restrictive process that ruins all their fun. I see it as an opportunity to spend money thoughtfully on the things that really matter to you, and to stop spending so much darn money on the things that really aren’t that important to you in the first place. Spending thoughtfully is critical in order to build (and maintain) a strong financial foundation and is a key piece of spiritual growth.
Our children have grown up around excesses that most of us did not have, which means they are going to be tempted to spend, spend, spend. Here are some tips for giving your children some budget wisdom:
- Start where they are – For younger children, talking to them about grown-up numbers is likely to be overwhelming. Using the word “budget” is probably too much! Instead, give them little opportunities to budget in real life. We have found road trips to provide great opportunities for giving children budget experience. Often when we go on a road trip, we give the kids a small allowance for souvenirs, perhaps $5-10. They can choose to spend the money on souvenirs at any point in the trip. Yes, it’s a little more record-keeping for us when one spends $2 at one stop and $3 at a different stop. But, it also allows children as young as five an opportunity to make spending decisions all on their own instead of relying on us to decide which moments really speak to them.
- Make giving mandatory – Part of spending thoughtfully means acknowledging that everything we have comes from God. Gratitude and tithing are a vitally important part of the discussion and a necessary discipline to teach kids. For younger kids, paying their allowance in coins makes it easier to divide their funds into tithing, saving and spending.
- Give them practice – As children get older, they will need more experience using a budget. We give our nine-year-old a budget for her clothing for each season. This allows her the experience of deciding whether she is going to buy some brand-name clothes or if she’d rather do a little bargain shopping. While the parents still retain veto power, it gives her a good dose of freedom to dress how she’d like to dress and spend more in areas where we might not. It also eliminates a lot of discussions at the store; she knows she gets that budget twice a year and anything in between is on her dime.
- Spread it out – As children get closer to graduating from high school, they should get more experience with making their money last for longer periods of time. While a six-year-old may get a weekly allowance, a 16-year old should receive their allowance monthly. This forces them to budget…or fail. If they run out of money in week two, then they may be a little more likely to conserve next month. Since most jobs do not pay weekly, this helps them get used to a real-life scenario.
- Let them fail – This is my very favorite piece of parenting advice! Kids feel better about themselves when they buckle down and solve their own problems. When your child runs out of money in week two and has to go a couple of weeks without allowance, will you pay for them to go to the dance? Give them gas money? Step in and rescue them? No! Stay strong! Remember when you were younger and out of money? What’d you do? My guess is you figured it out –mowed the lawn for a neighbor, sold an old Walkman that you didn’t use any more (I’m assuming you all grew up when I did in this example) or borrowed from that one sibling who always had money in their piggy bank. Since you were a teenager, you probably spent more time thinking about how unfair life is than you did about how solving your own problems was giving you self-confidence, but trust me, that’s what it was doing. Don’t rob your kids of that opportunity!
Rather than sitting down with a spreadsheet and calculator to give kids The Talk (the budget talk, that is), teaching your children how to budget should be an ongoing process. Watching them grow in their ability to be good stewards will be well worth the effort!
Written by Megan Poore, a Financial Advisor at Lucien, Stirling and Gray Advisory Group, Inc. in Austin, Texas and loves to talk about budgeting, which keeps her in high demand on the cocktail party circuit. She is chair of the Covenant Presbyterian Foundation.