Jul 18, 2012

Teaching Kids How to Budget

"No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money.."
Now that you have your own finances under control (after keeping track of every cent for a time and then getting a budget on paper), the next step is to start thinking about how to teach your kids the much-necessary skills to handle their own finances.

Ideally, this training begins when your children are preschoolers. (If they are older than that, don't fret! All of this advice works for older kids, too.) Begin by getting your child a teaching piggy bank. For ideas on buying or making one, read this post - but generally what you're after is a visual way for children to divide money up into three basic categories: Save, Give, and Spend. Now whenever your child gets money as a gift, or earns a little something by doing chores above and beyond what he's expected to do, he has a perfect place to put his money.

At this tender age, don't worry about teaching your child about percentages. (For example, giving 10 percent to the church.) Just help your child divide the money up into each of the three categories in some simple fashion; for example, if you child has three quarters, she should put one into each of the three money categories. If she has a dollar bill, she can pick which category to put it in, remembering to put a future dollar into one of the other categories.

As your child gets older and begins learning about dividing and percentages in school, you can teach him a more precise method of dividing up his money.

Above all, discourage your child from going out and spending every cent as soon as it arrives in her hands. It's natural for children to be excited by the idea of having their own money to spend, but encourage your child to spend a small amount, instead of everything he has.

Another important step is to read what the Bible has to say about money. Some children's Bibles contain parables about money, and there are also children's books aiming to teach a biblical view of how to handle money. To encourage generosity in your children, have them give some of their own money in the offering at church, encourage them to put some of their own money in a Salvation Army box, and, if possible, have them contribute to a family fund to help the needy. (If your child regularly earns money, she'll be proud to contribute all such funds at least once a year.)

By the time your child is in middle school, you can begin introducing the concept of budgeting. Let your child look at your family's household budget, and explain how having one gives the family peace instead of chaos. Then help your child create his own budget. This can be much more simple than a household budget. Have broad categories like giving, food, entertainment, and savings. Help your child come up with estimates of how much he thinks he'll spend in each category, then write those figures down. Show him how to keep track of recipts or write down each expense in a small notebook, then review the results after a month. How can he improve his budgeting?

By high school, your child should know how to track every cent and create a truly workable budget of her own. She should have her own bank accounts - ideally both checking and savings. She should know how to write a check and balance her account. It's also a great idea to let your child deal with the family's budgeting and bills, with you double checking her work afterward.

By taking these few steps, you'll empower your child. Not only will he understand God's ideas about money, but he'll have the skills necessary to save himself from the endless debt that so plagues our society. Time to go off to college or move out on his own? It's going to be a lot less scary now because he knows exactly how to handle his finances. What a gift you've given!

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