Unfortunately in most cases, they never learn how to budget money. The real regrettable part about that is that budgeting money is something most if not all children will have to do when they get older. Therefore, the sooner parents, teachers and other adults can teach children about handling money, the better.
Talk Openly and Honestly About Budgeting with Children
To start the process of money budgeting education for children, adults should talk openly and honestly about money and what it means in daily life. A great way for them to do that would be to discuss how money is made and what it's used for. For most adults that's pretty ease and straightforward.
Working adults can simply explain to children that they have to get up every day and go to work. In exchange for their work they get a paycheck. Each adult can choose whether or not they want to tell how much they make in their paycheck.
Along with the job and paycheck explanation, adults can also go over the monthly household expenses with children. Bills that come in the mail every month for expenses like housing, transportation, food, electricity and a whole host of other expenses go a long way in showing children that everything has a price that needs to be paid.
Most importantly in this conversation adults want to make sure that they explain that the amount of income that they receive should be more than the amount that they pay in bills every month. Otherwise they could have bigger financial problems in the future.
Show Children Debit Cards, Cash, Checks and Credit Cards
Most children love to touch and feel to help them understand things. That's why letting children see and hold a debit card, checks, cash, or a credit card can go a long way in helping them understand how paycheck money is spent. Then when the monthly statements come in the mail, taking 5 minutes out of the day can make it even easier to understand for children.
Write Down a Budget for Children
Adults can really help the process of teaching children about budgeting by having them actually get a pencil and paper and write down a budget on the paper. In fact they can do two budgets. The first budget would be for the child based on their allowance and their lunch and other spending money. That they'll get quickly.
They can also sit down with children and write down on paper a budget for the overall home. Not only would that budget include how much money is coming in but also show how much is spent on the important expenses of: Home, Car/Transportation, Food, Electricity, Telephones, Television and other bills.
Children Need Their Own Savings Account
Another great way for children to grasp the idea of budgeting is to give them their own savings account. With the account they get the chance to make deposits with their allowance, birthday and holiday money. This will be very helpful in getting them to understand budgeting because they are going to want money for school lunch, candy and other snacks. By having the savings account they'll be able to understand that not all money they get has to be spent and that some of it can be saved in their own account.
When children learn how to budget money they are much better prepared for life. For that reason the sooner adults can take the time to go over a few basic ideas about budgeting money, the better. They are lessons that take only a few minutes a month but stay with children for a lifetime.
About the Author
Kolonji Murray is President of the financial advisory firm Murray Wealth Group in New York. Prior to starting the firm in 2009, he worked as a banker and financial advisor for a number of leading Wall Street firms. He holds a degree in Accounting for Hampton University and is active in a number of civic and industry organizations. Mr. Murray is Series 7 and 66 licensed in NY, CT and GA. He is also life, accident and health, variable life/variable annuities insurance licensed in those states.