Financial fitness, like physical fitness, should begin early in life. As parents, we are our children’s first teachers, and it is our responsibility to teach them about financial discipline. The first step toward teaching your child to be financial fit is to develop a budget for him. If you are wondering how you make a budget for a child, then read the tips listed below.
*Preparing
Initially, talking to your young child about money management can seem a little strange. However, it is not as difficult as you might think. Introduce the topic using play money.You can purchase play money from any dollar store. Go over the different bills and their financial values. Explain that money is used to purchase items. If you have an older child, you can also opt to use educational games like “Monopoly” to help explain the value of money and how to make important financial decisions. Once your child has grasped this concept, you can move on to real money.
*Begin small
Of course, a child is not going to have the same financial needs or responsibilities as an adult or a teenager. So begin small with a mini-budget. The income for this budget will consist of any money that you give them for chores, birthday gifts, or other special occasions. Teach your child that this money is not to be wasted but carefully managed.
*Brainstorming money saving ideas
You and your child can get together and brainstorm ways to earn and save money. Having them save their loose change is always a good way to show how money can add up. You can also teach them about couponing, using discount cards and shopping sales.
*Give them an allowance
This is a good time to begin giving your child an allowance if you haven’t already. An allowance helps teach your child the concept of receiving money for work done. It will also teach them responsibility. Once your child has his or her allowance, begin doing fun little financial exercises like adding up the cost of a trip to McDonalds once a week for a year, or adding up the cost of buying one bag of chips each day for a year.
*Making the budget
Now that your child has his or her allowance, the two of you can make the budget. Get a pencil and a sheet of paper and list the amount of money that he or she will receive every week. Then give your child some financial responsibility. For example, you could make them responsible for paying for their own snacks. Add up the cost of chips or juice boxes for a week. Subtract this amount from their allowance. Then factor in a set amount of money for their savings. Subtract the amount of money they will be responsible for saving each week for their money. This should not be a large sum. The amount of money they are responsible for saving would depend on the amount of money that you are giving them for their allowance. Also, be sure to explain to your child that he or she will not receive any more money until their next allowance is due. Once you set the budget, stick to it. This will teach them the importance of financial responsibility.
*Practice using the budget
The next thing you will want to do is practice. Plan a shopping trip with your child. It can be a trip to a toy store, a grocery store, or any other store where your child might like to make a purchase. Help your child plan a budget for this trip. The amount of money allotted for this trip should be small. Have a set spending goal of no more than $20.00. Think of what item he or she would like to buy, how much the item costs and plan a budget. As you plan the budget with your child, explain each step in the process. Also, discuss any money savings strategies that can be used. Explain how these things will factor into the shopping trip. Be sure to commit all of this to paper so that they can visually see how it will work. Then, it’s off to the store to put this money managing plan into action. Once there be sure to let your child pick his item and pay for it at the register.
Making a mini-budget for a child is not difficult; begin small. Explain the concept of budgeting in terms they can understand. Practice, and then let them put their own budget to work.