Teaching Kids How To Budget
Teaching kids how to budget and save should not be an option but a necessity. Its essential that kids learn how to save when they are young so they can develop good habits and become well-equipped. They will become financially responsible adults and avoid so many problems.
Kids must learn about money.
Children Can Start Saving At Age 5
Parental guidance on saving, budgeting, and spending is a real benefit. It creates habits that allow them to effectively manage their finances as adults.
Set a good example: Imagine the conflict created within a child’s mind if they are told to be frugal, but they witness Mom or Dad buying cars, electronics or clothes on a whim and falling into careless debt. Parents must explain spending decisions such as needs versus wants.
Explain credit and debit cards: It’s never too early to point out the uses of financial products, such as the difference between debit cards and credit cards. By the time children leave for college, they should know how a debit card works and, if they are ready, apply for a credit card.
Find a cool app: Technology can help open the eyes of kids to the world of saving and spending. The latest apps are a way of tracking the savings and seeing the growing interest all in a language they understand. For example, The Nickel app has grown in popularity because it replaces the traditional paper-money allowance without the drawbacks of other digital payments. Nickel is a prepaid, reloadable MasterCard debit card, where an allowance can be auto-loaded each week or month. But children can’t take cash from the card, keeping parents in control. Parents can track spending day by day and it can be broken down by individual retailer. Parents can transfer additional money to the card and the card can be placed on hold if it’s lost (or the child loses spending privileges).
Make them work for wants: If a child occasionally wants to purchase a non-essential fun item and doesn’t like fun things; teach them that a reward must be earned. If they don’t have a job, they can earn extra money by doing chores around the house. Assist your child in identify what they want, understanding the cost, then find a way to earn it. This method enables them to develop a sense of appreciation for how much things cost.
Offer innovation and inspiration: Involve children in the family’s money-making decisions such as teaching them about generic brands and purchasing items in bulk. Parents could also give the child a small amount of money in a grocery store and ask them to choose the best-value item from something on the list such as fruit or water.
Talk about purchase value: Questions can be asked about various purchases. Do we really need this? Is it available at a discount store? Should we not buy this item so we can have more money for eating out later in the week?
Teaching Kids About Saving, Spending & Education
Create three jars — labeled “saving,’’ “spending’’ and “education.’’
When a child receives money for a birthday gift or earns money for chores, the money can be divided equally among the jars. The spending money can go for smaller items. The education money is for a prepaid college savings account. The saving money should be accumulated to purchase more expensive items. As with any meaningful exercise, a child learns how to save money by making good choices.
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