Budgeting For Kids

Psalm 115:14

Budgeting for kids ought to start out early in order to help them form good habits from the beginning; habits that, perhaps, you never learned or didn't learn until much later in life. There are three things that you can do with your money. You can save your money. You can spend your money on yourself. You can spend your money on others. Your attitudes in each of those areas are formed early in life and are hard to break away from. Children need to learn the appropriateness of each category.

Mason Jars
One way to teach your children these concepts is to get three mason jars and label them; one for giving, one for saving and one for spending. Decide beforehand how much should go in each jar each time the child gets money. One oft cited division is 10% for giving, 10% for saving and 80% for spending. Whatever the percentages are for each jar, they should be something that you and your child agree on together.

Generosity is an important concept in teaching budgeting for kids. If you teach your child early to give away something for which they will likely see no reward, that generosity cultivates an attitude of generosity. Christian children who grow up tithing grow up to be adults who tithe. Children who are taught generosity imitate Jesus Christ, who gave up everything to restore us in our relationship to the Father.

Help your child set meaningful financial goals. Some of this comes from sitting down with your child and understanding what is important to him or her. Maybe it means that you share some costs. Maybe you are willing to buy your child some tennis shoes but your child wants the flashy ones that cost a little more. You could then offer the amount you are willing to spend on shoes to your child and let your child pay the extra for the flashy shoes. There is a lot of satisfaction and gratification in saving up for something and then going out and purchasing that desired item. Instant credit (gratification) has robbed us of that joy.

The spending jar is really for their discretionary spending. At first you might see that they are spending their money on candy or comic books or toys. But after a while they will see something that is beyond their reach financially and they will realize, perhaps with your help, that if they hadn't spent their allowance last week on whatever, they would be closer to being able to buy what they want now. What a wonderful parenting moment in teaching budgeting for kids!

Allowance or Not
Should you give your kids an allowance? There are two schools of thought about this and I am convinced that neither one is particularly right or wrong. Giving an allowance or not is all about what you want to teach your children with what you do.

No Allowance
Some parents will say that as members of the family the children are entitled to a portion of the family income therefore all of the children's needs are met by the parents. The parents are then also able to keep tighter control over the children's discretionary spending and prevent them from spending their money foolishly, to a point. This is what my parents did. However, my dad taught me a very valuable lesson when I was a teen and let me spend $100 more on a stereo receiver than I knew I should have to spend. OUCH!!!

Some parents will give an allowance and tie that allowance into chores around the house in an effort to teach responsibility. The child then is responsible for paying for their own stuff, like clothes and entertainment. How much they spend and how they spend their money becomes their own decision.

What We Do
I will share with you what my wife and I do. We combine the two methods and more. Ever since our kids were young, around five years old or so, they have had an allowance. That allowance was calculated based on their age. They received $0.10 per year of age. So the five-year old got $0.50 per week for discretionary spending. They were required to tithe on their allowance so I tried to make it easier on them and gave their allowance to them in a form that was easy to divide, a quarter, a dime and three nickles, as an example. This was a great way to help teach different math principles and make budgeting for kids easier.

Involve The Kids
As our children have grown older, they still received their allowance which became really meager when they entered into their teens. However, we kept this allowance level up because of the principle that whoever is faithful with a little will be faithful with much (Luke 16:10). Their allowance is still their discretionary spending but we have started to involve the children in setting certain budget category amounts like their clothing.

Clothing Budget
Each of my children have an amount that they can spend on clothes throughout the year. They helped set that amount and know what that amount is when they go shopping. They are permitted to go to the high-end fashion stores and buy clothes if they want to. My daughter will often choose to go to a second-hand store and get good quality clothes at a much cheaper price. She knows that her dollar will go farther there. She has learned to shop for value. This is one way we have taught budgeting for kids.

Make Learning Fun
Another way that we have taught budgeting for kids is to buy curriculum. We are a home school family and we have tried to incorporate a little bit of fun into every subject we teach. However, I will tell you that a child's attitude towards learning will determine the amount of fun that is had. There were worksheets and activities geared for the children at their level to help them better understand the budgeting concepts. However, in addition to the budgeting concepts, our children were learning that God is the owner of all that is and they were beginning to develop their own personal relationship with the Great Provider.

Time Value Of Money
Another important concept in teaching budgeting for kids that we want to emphasize to our children is the time value of money and the power of compound interest. Consider Alice an Bill who are 18 years old and have jobs. Alice decides to put away $120 per year. Alice faithfully puts away her $120 per year for the first eight years and then quits and just lets her money sit and collect interest. Bill, on the other hand loves to spend his money and for the first eight years he does. On the ninth year Bill starts putting away $120 per year until he retires at age 65. Assuming a constant return of 10% who will have more money when Alice and Bill retire at the age of 65? The answer may surprise you.

Now the next question is, "Do you think that if you got into the habit of saving, you could save more than $100 per month over time?" And what about your children; if you were to teach budgeting for kids to them? Do you think you could help them catch the vision?

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