Jun 28, 2013

How to educate your children about spending and budgeting

As a parent you will always want the best for your child . A major part of them leading a happy life as an adult involves them being responsible, which is why teaching them about spending and budgeting is so crucial.

Chances are that your child will listen eagerly if you try to tell them something about their favourite football club or celebrity, but if you turn the conversation to the importance of being financially responsible, then you will get an eye-roll, huff, or perhaps even a straight exit from the room. It is not an easy topic to broach because on the face of it budgeting is not fun.

Money is, without doubt, what makes the world go round - it is not the most important thing in it, but it definitely drives people forward - and the sooner your children get the hang of how to look after their finances, the sooner they will be able to achieve what they want. Also remember that it doesn’t always have to be the parent that talks money with children - Grandparents can help to reinforce the importance for their grandchildren to save and can even consider opening up an account to save for their grandchildren too.  

Cash
Essentially, what you are trying to do is show your child that spending all the money they have in their hand is not the most effective way of doing things. Instead, what you would like to instil is the idea that they will benefit from putting some money aside - but at the same time that it is fine to sometimes spend money spontaneously .

On the one hand, you want your child to be sensible enough with their money to be able to save up for larger and more significant things in life (car, holiday, home, university etc.) without needing to rely on credit, while also ensuring that they are relaxed enough to spend a bit of cash when they believe it will make them happy - on a nice new garment of clothing, perhaps.

You
So what can you do to encourage this mentality? It starts with being a role model to them by putting money aside yourself - whether in a conventional savings account, savings plan or a pension. If they see that you don't splash all your cash as soon as you are paid, then they are more likely to avoid doing the same.

The other main thing you can do is give your children experience of money when they are young. Without putting a price on everything (you want them to retain their childhood innocence as long as possible) you can now and again talk to them about how much something costs - and also ensure they have an allowance.

Your Child
Depending on what kind of personality your child has, they may either spend their childhood splurging all their cash as soon as they get it, or simply hoarding all the money they ever get - or they could be somewhere in between. Making mistakes while they are young means that you can talk to them about how they could have done things differently to achieve a different result.

When you can sense your child is keen to buy something then you can put forward some ideas of how they could go about purchasing the item in question. Leveraging their desire to have object X, you can come up with a plan; in this way, you can subtly introduce the concept of budgeting.

*Brand journalist Lauren Sutton is an in-house writer for UK family savings provider Foresters Friendly Society. Read more financial savings tips on Twitter @ForestersFriend

4 comments:

  1. I have two opposite kids. Daughter is a saver like me while son is a spender like his Dad! I made sure to teach them proper spending and saving money from time to time.

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    1. Good that one of you is a saver. Both of us are spenders, so I really have to work on being a good role model.

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  2. this post reminds me of the training we had when we were young, very true, despite the very good modeling of my parents and the training we had, in my first month of handling my allowance, i was the type who splurged all my cash, but parents were very good, they did not add anything, so I had to walk several miles each day to school,rain or shine. i learned my lesson the very hard way since i did not learn it from the very good modeling of my parents. from then on, i became very careful with money because i know my parents won't add anymore to my monthly allowance. my youngest brother on the hand, was at the extreme, hiding all his allowance, and not spend anything except for transportation. he brought his own foods to school, etc etc. the rest of my brothers were in between. siblings indeed could be very different despite receiving the same teachings and modeling from parents.

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    1. i agree with your last statement, sis. Each person is unique from birth and each child handles situations differently. As children, we are like sponges absorbing everything around us, but then we have different ways of internalizing and processing what we had absorbed. Like you and your siblings, my brothers and I are like opposite poles and we're scattered in different directions when it comes to views on things and yet we had the same upbringing.

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