As adults, trying to set a budget should be a natural part of responsible financial management. You put it together to make sure that you can track your monthly income and expenses. It is also an important financial tool to give you the ability to make informed decisions at any given time. If you have a clear overview of your finances, you can make the necessary changes when you need to.
There will come a point where you need to help teach them the basics of financial management starting with a budget. Most parents would get a piggy bank and just ask their children to start saving money by putting loose change in it. You then proceed to open it a specific time in the year, count it and use it to buy what they want.
This is a great start but what if you can help them set a budget for their own need? If they can already grasp how money is earned and spent then it might be a good time to help them with this goal. Forbes shares that teaching children about money can help them live financially fit lives. The challenge for you as a parent is to try and look back at how you started budgeting your money. You need to start at a very basic level to help your children understand the idea of balancing their money.
If you want to get started in helping your children set a budget for the year, there are a few things you can look into to get them on the right track. It can help you
Help them understand what a budget consists of
To help them set a budget, it is a good start to help them understand why having a budget is important for them when they grow up. It might not make a lot of sense for them while they are still young that is why you need to talk to them about it. This is already a challenging part for you as a grown-up and you are just getting started.
One thing that might work for you is to uses examples which they can understand easily. If they love to play with certain online games, you can use that to your advantage. Most online games now have a way of earning a certain form of currency for achievements they make in the game. You can use that to help them teach about managing money.
Just like how they do it in their games, they need to work on earning their money. The objective is to use it wisely just like in real life. As they earn money, they need to know how to spend for their basic needs and how to save the rest for future use. Take a look at what your children are into and use that to help them understand budgeting better.
Connect their budget to a specific goal they have
To help your children set a budget or at least be excited about it, try connecting it to a goal they want to achieve in the future. It can be as simple as buying a toy, purchasing an app, or getting a gadget they need. Help them understand that if they budget and use their money wisely, they might just be able to afford what they need.
First, help them figure out how much they need to be able to pay for their goal. It is usually the price tag on an item they want. How much is that toy, that mobile app, or that gadget they want so bad? That amount is the goal they need to work on. It can help them save money knowing how much they really need to save up for.
Give them a source of income
In order to help them set a budget, they need a source of income. At their age, this could be a little challenging. This is where you can come in as their parent and provide them a source of money they can use to save. For most parents, this normally comes in the form of an allowance given to their children on a regular basis.
The amount normally varies from one household to another and a lot of factors come into this decision. You have to think about your lifestyle, the overall financial situation of the family, and even the place where you live. One thing you need to remember though is to not give them too much that they would not find the need to save for a long time.
Regular income is much like how you get a regular salary at work. Getting a fixed amount at regular intervals allows them to plan ahead. You can also look at financial rewards for chores they pick up around the house. Though try to limit the extra money to extra chores and not the omes they are assigned to. They also have to learn that not everything they do for the family should be a paid activity.
Help them allocate their money for different needs
As you help your children set a budget for the year, you can also help them decide how to allocate their money properly. This can be a big help especially if they are saving for more than just one item. They can be putting aside money for a toy, online game, clothes, or even to help people who recently had to endure natural calamity.
The amount they will save up for a specific item they want depends on how high up it is in their priority. If they want to buy that toy which is at a discount only up until the end of the month, they can focus on that first. They can then move on to other items on their list that they want to purchase. The amount they save for each item depends on how important it is for them.
You can even teach them the concept of borrowing money from a lender. Much like how you borrow money from a bank to buy the house, they can do the same with you as the lender to purchase what they want. They then pay you back every month with their savings. It is important that they pay you at a regular schedule with the same amount. This helps train them to pay their bills on time when they grow up.
Remember to make it fun for them
As you try and train your children how to manage money at an early age, it helps to make the experience as fun as possible. There is no need to make them memorize financial terms at a young age. It might only stress them out and decide to focus on something else. Make the experience a fun and memorable one for your children.
One thing you can do is gamify the experience for them. Not only will this make it more enjoyable, but it could also make them more interested in the process as well. Create a way where there are rewards for the achievements they make. If they get to save a specific amount, go out for ice cream or a movie date. You can even set up a way to match what they are saving to encourage them to reach their target. Psychology Today shares that gamification is a great method in helping children learn about finances.
It is a good idea to train your children early in money management and help them set a budget early on but make it a fun activity for them. This encourages them to keep this habit and helps them remember the lessons they learned when they become adults.