Your child’s start in elementary school is a great time to begin to teach some basic budgeting. Here are three ways to help your kids learn about the fundamentals of a good budget, and keep them engaged in the process.
1. Allowance
Depending on your situation and your own money values, giving your child an allowance may or may not be on the table. If you are looking at an allowance for your kids, you may want to take the following into consideration:
- An allowance is a tool to teach your kids about how to manage money. Think of an allowance as the money you would spend on your child anyways, but you’re giving them the power to decide how it is spent. Rather than you saying no or giving out the money as the requests come in, you’re teaching your child about making choices. They’re in control and responsible for managing their money.
- Many experts will tell you that an allowance shouldn’t be tied to chores around the house. The thinking is that as a member of the family, everyone needs to pitch in and do their part to make the household run smoothly. After all, in the real world, no one is paying you to keep up with your household chores. Having said that, some families identify certain chores as extras and tie a certain financial reward to them if completed. Again, it’s all about what works for your family.
- Typically the rule of thumb for how much of an allowance to give is a dollar per year of age. For example, your six year old could receive $6 each week.
- Though the allowance doesn’t necessarily need to be given each week, it does need to be consistent. Determine the timeframe that works for you, whether that coincides with your paydays or is weekly.
2. The Jar System
The concept behind the three jar system is to get kids in the practice of allocating money when they receive it. You don’t necessarily need to use actual jars – small boxes, piggy banks or other containers will work. The key is that there is some kind of physical container for saving, one for spending and one for sharing so that kids can see where their money is going and how much they have in each category.
How much should go into each category?
- Save: a good rule of thumb for the savings jar, at this stage in life, is anywhere from 10% to 20%. If you can instill this one habit early on, your child will be well on their way to being financially fit.
- Spend: this jar will have some flux. For example, it could include any expenses your child will assume responsibility for – lunch money, bus fare, even extra-curricular activities could fall under this category as planned spending. The spend category should also include a little money for your child to spend freely.
- Share: typically 2-5% of your child’s allowance would go into this category. This category of money is intended for your child to either help someone that may need it, or support a cause that matters to them.
3. Show and Tell
Open up your own budget and share it with your kids. If you’re feeling uncomfortable with this suggestion, you’re not alone. Many of us didn’t grow up in households that spoke freely about money and financial decisions being made. Even if you don’t feel as though you have a good handle on your budget, it presents a great learning opportunity as a family. Not to mention, being an open book just may give you that push to do things a little differently if you’re not happy with the status quo.
In addition to showing your budget, use those every day opportunities to talk about money. Here’s an example: when you’re putting together your grocery list, have your child help.
- Talk about the items that the household needs and how they fit into your budget.
- Will you purchase all of it in one shopping trip, or maybe you’ll spread it out over a month?
- In the grocery store you can show them what it means to comparison shop, and don’t hesitate to include them in a taste-testing experiment. Sometimes shopping the no-name brands doesn’t have you compromising on taste and it can be a big budget booster.
The goal with all three of these suggestions is to create comfort for your kids around money and finances. And as with anything, the more they learn and practice, the more likely they’ll carry those lessons with them into adulthood. As parents, there’s a lot of peace of mind that comes from knowing that our kids have the tools they need to be financially fit.
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