Let’s face it…kids are expensive. So how can you save money and teach your tweens and teens to become financially responsible humans while raising them?
It’s safe to assume when kids understand the mechanics of money and the values-based decisions your family makes about money it opens up the opportunity for them to feel encouraged to save more and become a participating member in the family budget…and hopefully create their own financially sound budget.
In this blog, we will look at a few ideas and ways to teach your children about how to spend money wisely. In turn, you may be able to save a little along the child-rearing journey.
The Monthly Allowance
One method some of you may choose to embrace is using larger allowances for your older kids to teach them how to manage their own expenses.
As opposed to buying them everything and giving a small amount of fun money, this idea would encourage kids to spend the money they receive wisely…because once it’s gone. It’s gone until their next ‘pay day’. The amount they would receive should include anything you buy for your child anyway (clothing, shoes, lessons, after school activities, cell phones, computers, gifts for birthday parties, etc…).
The line items, amounts, and how much you’re involved would vary based on the child’s age, their maturity level and your budget obviously. The idea isn’t to spend more than you normally would, but to instead to teach your child how to make good purchases, manage finances and let them make their own financial mistakes so they can learn from them at home.
If they want more for other miscellaneous expenses, it is up to them to figure out a way to get more…legally of course.
Here’s what a child’s monthly allowance might look like: (each month won’t necessarily be the same…your child won’t need a new pair of shoes every month…no matter what they think.)
Dance lessons $65
Cell phone bill $45
School lunches $62
Science lab fee $10
Using this method with your kids would mean that at the beginning of this example month, you would give them $332. They would then be responsible, under your supervision, to spend it wisely to ensure that all necessary expenses are paid for the month.
Discussing Wants vs. Needs
Always make it a point to discuss wants vs needs with your children. This can be done as soon as they are old enough to understand the difference. For example, you may say to your tween or teen child, “You need shoes, you want Nikes.”
Offer to pay the certain amount you have budgeted for said shoes, and if they want to work for extra money toward better shoes, then they can apply the money they have worked for to the purchase of the better shoes. Grasping wants vs. needs is a pathway to making smart financial decisions, and this should be taught early in life.
Allow Kids to Help with the Family Budget
Does your family maintain a steady budget?
Whether you set your budget weekly, monthly, bi-monthly, or you budget 2-3 months at a time, get your kids involved.Whatever works for your family and your income is great, but keep in mind this is an excellent teaching opportunity for kids.
Let them be present in setting the budget. When your child knows how much money needs to be allocated for needs vs. wants, they will better understand the importance of money. It isn’t necessary to let them know every little facet of your finances.
For example, they may not need to know how much money you make at your job. Instead, what they need to know is what your required expenses are each month are and what is left over for extras.
When your child knows you have $200 left each week after paying for the necessities, they can better understand why the Nike shoes aren’t feasible. This is also a great way for your child to learn what is a necessity rather than a luxury. Electricity, water, heat, food, your phone and some form of transportation are all necessities… name brand clothing, cable, Netflix, Internet, the latest and greatest cell phone, etc. are luxuries and not necessarily needed to sustain the family.
Limiting Expensive Sports and Activities
Kid’s activities can quickly bust a budget if you let them get out of hand. Most parents know that kids frequently change their minds about what activity they are interested in. One day it may be dance, and the next day that same child no longer likes dance but instead wants to try karate.
By limiting your child to one or two extracurricular activities (whatever fits comfortably into your monthly budget), and teaching them to stick with one activity until it is over, not only shows them about commitment, but it can ease the financial burden on your pocket book as well.
When sweet little Sally comes to you and expresses her avid interest in ballet lessons, explain to her that she will be fully committed to these lessons for the duration of the class, whether it be 8 weeks or 16 weeks…she must stick with it. If you are going to invest your hard-earned money into the classes, she will be just as invested as you. Because next week, little Sally may decide ballet isn’t her thing and she needs to understand she is in it till the end.
Being frugal and financially smart with kids isn’t just about saving money. It’s about instilling sound financial messages.
While saving money is nice, the ultimate goal is to teach our kids how to properly value money and make smart financial decisions. Instilling a healthy approach to money in our kids will hopefully set our children on a path to finding meaningful work, identifying their deepest passions, and the ability to be financially responsible adults.
Teaching kids to save is a big part of personal finance education, and sometimes the best way to teach is by example. Download our newest ebook for ideas on how to tackle big debt while also saving to make your next purchase.