Here’s a handy guide for you to help your child understand the importance of budgeting.
As children grow into their teenage years, they require guidance to build their first budget. Here’s a handy guide for you to help your child understand the importance of budgeting. It is important to teach your children good budgeting skills. You can achieve this in several small ways. Teaching them this vital financial skill need not necessarily be time-consuming.
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Offer a monthly allowance
Giving your children a monthly allowance will allow them to realise the importance of long-term financial planning. They will learn to stretch that money until the end of the month. If they spend the entire month’s allowance in the first weekend, they’ll learn an important lesson in delayed gratification. They wanted something now? If they haven’t got the money, too bad, they’ll need to wait. What you need to do is simple. Pay them an allowance and be firm about not helping them out if they run out of money before the month is over.
Your teenager’s bagged a job, you say? Wonderful! If that is the case, you should consider the allowance that you give them as a supplement to their new-found income.
It would not be very motivating for your child to see their allowance reduced because they landed a job.
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Have them take on some necessary spending
Many parents permit their teens to use their allowance and salary as pocket money. Well, it’s perfectly fine to allow your child some fun-money, why not give them some financial responsibilities too? Help them learn the ropes of managing expenses by asking them to start paying a few household bills. Learning to pay the bills will teach your teenager an important lesson in paying for their own expenses as they grow into responsible adults.
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Teach them to save money with Recurring Deposits
Teach your child to set financial goals. Encourage them to save money towards achieving these goals. Tell them the benefits of opening Recurring Deposits which will help them save a fixed sum of money on a regular basis.
Open a Savings Account for your child and encourage them to transfer some of their allowance or salary into the account when they get paid. They will learn the importance of paying themselves first and inculcate the habit of saving money regularly.
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Help Them Track Their Expenses
Tracking expenses and monitoring savings is a good habit to inculcate in children if you want them to learn financial independence. They should be aware of where and how they spend their money each month. They will then be in a position to judge whether those expenses were actually worthwhile. You should encourage them to spend their money wisely.
Have Regular Budget Meetings
While you are doing something that will help your child become financially savvy as they grow up by giving them an allowance, remember to remind them that you are always watching how they spend their money. Sit down with them once or twice every month – maybe at the start of the second month since you began giving them their allowance and again at the end of every month, to take stock of their expenses and savings. Ask them how much they’ve spent in comparison to how much they’ve managed to save. This exercise will teach your children to review their finances regularly and not get carried away by splurging money.
Budgeting is the keystone of good financial health but knowing how to budget wisely does not necessarily come naturally to people. Teaching children these habits at a young age will serve them well later and enable them to face financial challenges that are part and parcel of being responsible adults.