Teaching children at a young age to budget and save their money should be on every parent’s agenda. As soon as children are learning about amounts and being introduced to the concepts of addition and subtraction, parents can begin to teach them about planning expenses, budgeting and savings. Learning about these concepts early on will help children continue to be prudent about spending their money as they grow. There are many ways to familiarize children with budgeting and savings.
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1. Budgeting 101. The American Bankers Association through their Teaching Children to Save website, offers a wonderful idea to teach children about budgeting their incoming money. The program suggests using four jars labeled with “Sharing,” “Spending,” “Short Term Savings” and “Long Term Savings” to divide any money the children receive. Parents and children together can decide how much goes into each jar each time the child receives money.
The “Sharing” jar will teach children to use part of their money for a charity of their choice, the “Spending” jar money can be used for small purchases and the “Short Term Savings” money can be used to purchase larger things that the children need to save for over a period of a few months, while the “Long Term Savings” money will be saved for the future.
2. Couponing 101. One often forgotten way to teach children about spending wisely, saving money and budgeting is by using coupons. Parents can explain to kids the value in using coupons and how the money saved by them can add up to be used for other things. Children can help to search for and cut out the coupons, organize them and then look for the correlating items at the store. They can even calculate how much they are saving if they are old enough.
Big spending projects can also benefit from the use of coupons. For example, if the child wants her room redecorated and loves the products from The Land of Nod, the family can research the prices of the items the child wants to buy, tally their cost and make a budget. Then, the child can be guided to look for The Land of Nod coupons as a way to bring down the cost of the items, freeing some of her budget for additional things. If the child wants to buy online, there are also coupon codes for The Land of Nod that can be used for savings. A large project like this one can help a child learn the benefits of planning, budgeting and finding creative ways for additional savings.
3. Banking 101. Once children begin learning about budgeting and savings, they can move on to opening a savings account. Parents can make an event around the opening of the savings account and help children monitor how their savings are growing each time they deposit money in their account. Parents can also keep children motivated to continue saving by matching the children’s savings dollar for dollar. When children see how their savings are growing twice as fast, they might be more inclined to make the tough decisions of saving their money instead of spending it on impulse buys.
4. Spending 101. Children need to learn how to make spending decisions and the only way to do this is by actually using up the money set aside for spending. A CNN article recommends letting children use their spending money freely, allowing them to buy impulsively and make mistakes and then dealing with the consequences as a way for them to learn how to actually spend money thoughtfully.