It is never too early to teach your child how to budget, even if the only thing they have to budget with is their allowance money. In fact, instructing your child in the art of basic budgeting is so easy it only requires four steps.
1. Cash is king
With young children, cash is king. Cash is a tangible, physical thing that children can see, touch and feel. Like snacks, kids understand that when money is gone, it’s gone. Kids can follow this straightforward concept quite well, making cash the optimum teaching tool. Paying your child a cash allowance teaches the value of money and even gives them a head start on basic math principals.
2. Make a chart
All successful budgets require a system. For young children, a chart is a powerful thing. It doesn’t have to be complex; it could even be on the computer. Your weapon of choice is up to you.
The makeup of the chart doesn’t need to be complex either. Draw a chart with two columns. Put the total amount your child receives for his allowance at the top, and under that, have him account for his expenses. Use one column for his projected budgetary expenses and then the second for his actual expenses. This way, he can see how both measure up and will learn how to adjust his budget as needed.
3. Make an agreement
You and your child need to draft some sort of agreement to determine how and when his allowance is spent. If you go to the store and he wants a candy bar, are you going to buy it for him, or is that something he needs to purchase out of his allowance money? Having a firm set of rules in place makes it much easier for both of you to draft (and stick to) his budget.
4. Track the chart
As your sprog spends his allowance, go back to the chart with his receipts and account for the expense in the “actual” column. Did he come in under budget? Did he come in over budget? From here, teach him how to adjust his budget based on his paydays.
For example, if he spent $3.00 more than he budgeted for on his dinosaur toy, it means he doesn’t have the money to buy a candy bar the next time you go to the market. He now realizes that he has to will remove that item from his budget and save it for next time.
Budgeting is easy, and it’s a terrific way to get your child started off on the right monetary foot, even in his early years. As he grows, the budget grows with him, eventually becoming a solid habit that lasts a lifetime.