Budgeting Lessons for the Younger Generation
With Christmas right around the corner, it’s only a matter of time before the kids start making their wish lists for presents. If you’re a parent, this time likely means a tighter budget to afford all the extra costs of the holidays. It’s also an excellent time to teach your kids about good money management!
The holidays provide a great opportunity to teach your kids about the importance of being a healthy consumer. Many of us are making bigger purchases this time of year and this requires us to do extra planning and saving. Why not use this experience as a learning tool to educate your kids about financial responsibility? No matter their age, children can learn the basics of a good budget that can set them up for a successful future.
Be a Good Example
Did you know that children develop money habits by the age of 7? Kids learn these habits by watching how the adults around them interact with money. We may not even realize it, but our kids are noticing those instances where we’re quick to pull out our credit card for purchases, or how we struggle to pay for unplanned expenses or debt.
Although it can be humbling to know that your kids are watching your money habits, it’s also a chance to set a good example for them. For younger children, you can teach them the differences between essential expenses and unnecessary ones. This exercise is a good way for kids to begin understanding how to develop a basic budget.
If your kids are more mature, you can try a budgeting exercise that demonstrates how to balance expenses and savings. One way you can do this is by using a simplified version of your household budget as a template. You can review the monthly expenses your family is responsible for, from utilities to their after-school activities. For kids, seeing the big picture of where your money goes gives them a stronger knowledge of how expenses accumulate. For an added learning exercise, you can have them sort your monthly expenses according to the 50/30/20 budget rule.
Practice Saving and Spending
Another tip we recommend is encouraging kids to learn about how to save their money and make informed decisions around purchases. After all, practice makes perfect! For smaller children, you can give them a clear jar to store their money, which will provide them with a visual understanding of how money grows. When your kids want to spend their money, have them bring their jar with them so they can make the purchase and learn how much money it will cost.
For older kids, a helpful way to instill good money habits is to teach them the value of an earned dollar. Rather than give them an allowance, have them earn money for the chores they do around the house. This small bit of financial independence enables them to think about what types of purchases they want to make. When they pick out something to buy, have a conversation with them about it. Ask them to wait a few days to see if they still want to purchase it or if their interest was only temporary. Your kids will become more mindful of how they spend their money and be less likely to make an impulsive buying decision. By teaching them these foundations of a healthy budget, you can help them avoid future situations like bankruptcy.
If you wish you had learned these money lessons sooner and are now in need of debt relief solutions, contact a Licensed Insolvency Trustee today. We can review your financial situation and discuss options such as a consumer proposal or bankruptcy and help you move forward.