Article in Summary:
- Does an allowance really teach children how to manage their finances?
- One effective means of teaching children about personal finance is having them help you budget your next vacation
- There are other neat ways to engage your children in household finances to help them learn the basics of what it means to manage their finances.
Bigger kids mean bigger toys. I don’t know about you, but the weekly allowance I’m doling out doesn’t seem to be going very far these days. I’m beginning to wonder if this whole allowance idea is really teaching my kids how to manage their finances. Or if it is just enabling a behavior I’d rather not reinforce – that someone else pays for the “big” stuff…
Don’t get me wrong. I do think that giving a child an allowance is an important component of teaching our kids about money management. But it is not enough. As we move into a cashless world of online ordering, mobile banking and pay by PayPal, how are our children going to learn what it’s like to really save or budget the increasingly abstract concept of money?
If you are struggling to instill a sense of fiscal responsibility in your child, here are three ideas you might want to try:
Budget your next vacation TOGETHER.
You may know roughly how much you can afford to spend on your holiday trip to Disney, but does your child? How many times have you planned a wonderful trip only to be met with complaints from your kids upon arrival? They do not make the connection between the size of the hotel room and the ability to have lunch with the Princesses.
So sit down with them and create a budget for the trip. Give them choices – which hotel should we stay in? The one with the fancy water slide or the one with the bigger rooms? List out your costs: getting there (car versus plane), rental car (SUV or sedan), hotel, family activities, dining options, etc. This exercise becomes a math puzzle. You only have X to spend on all these Ys…
You will be accomplishing two goals that might make for a more pleasant trip.
One: You have now figured out how much the trip is really going to cost. Of course, as the parent you always have veto power (I am NOT sleeping in one small hotel room with my spouse and three kids – ever. No Princess is worth that.)
Two: You now have buy- in from your kids about everything. No complaining about sharing a bed, going to swim with the dolphins, squeezing three into the backseat of a sedan. Those sacrifices were made for a reason – sitting next to Beauty instead of the Beast.
Turn Off Those Lights!
Our electric bill soars in the winter time. And we have oil heat not electric…for the simple reason that my children leave lights on wherever they go in the house. All day. Even when they are at school. If you are tired of yelling at the kids to turn the lights off, show them the monthly electric bill.
Create a contest – “If we can reduce the bill by 10% we will go to the movies.” (Thus using up someone else’s electricity, but a minor point, right?) Make sure the contest spans a few months since it takes 60 days to develop a new habit. Get them engaged in ways to reduce the bill beyond turning off the lights.
Move on to the heating bill or the cable bill (do we really need The Poker Channel?) Since no one ever answers the home phone except Mom, do you really need a landline? The point here, of course, is not to become Frugal Fanny, but to help your kids understand they do have some control over spending choices.
Not going on a holiday trip this year?
Then try creating a Gift Budget. I don’t know about you, but I’m tired of slapping my kids’ names on Christmas gifts that they didn’t even pick out. With gift budgeting, each family member is allotted a certain dollar amount for gifts. It can be a separate amount per family member or if you want to get really tricky, just a total. In a family of five, this requires some serious thought for a seven-year old. Should she spend it all on Mom (hint, hint) or try to dole it out equally? What if there is money left over – can she keep it? I guarantee the gifts will be memorable if not appreciated…
Already tried these ideas? I’m sure there are many more ways to drive home the importance of making wise financial choices. Have you found a creative way to reinforce smart financial behavior by your kids?