Getting your kids to take an interest in budgeting may be easier than you think, especially if you approach the lessons in a way that's fun and interactive. While there are several Web-based games and programs that kids can use to keep track of their earnings and expenses, many low-tech interactive methods are just as effective. For the best odds of success, start young -- age 4 is appropriate.
The Envelope System
The good, old-fashioned envelope system of budgeting is a simple way to demonstrate the idea. Working together, divide the child's money between envelopes, each of which is marked for a specific purpose. When they're little, they may only have two envelopes, such as "saving" and "toys." Older kids will have more; for example, gas for the car, entertainment, clothes and school supplies. When they're ready to spend or contribute, sit down together and discuss their plans. Show your kids how to keep a tally of what and how much they've spent and saved. As they get older, they'll be able to do it on their own. The envelope is also a concrete way to demonstrate consequences -- when the envelope is empty, it's empty, and no amount of pouting will make it full again.
If you prefer a high-tech approach, try one of the many free budgeting programs that are online and cater to kids of all ages. The Mint.org operates a kids' website that runs educational games and trivia. "Sense & Dollars," from Maryland Public Television, lets kids try to manage a monthly household budget with a given income, illustrating the difficulty of managing a real-life household budget. "Budget Odyssey" is geared toward older kids and teenagers, and it includes lessons in credit as well as budgeting, saving and spending (see Resources). Be sure to sit with your kids while they're playing and learning; providing real-life feedback and showing you care will go a long way toward increasing their interest.
Finance guru Suze Orman recommends eliminating the term "allowance" and replacing it with "work pay." Assigning each task a dollar value can help kids become more interested in saving -- a key budget goal -- while also teaching them that pay for work is the way the world works. When their envelope is on the slim side and they're saving for that hot new technology, relating work to pay to savings is motivating. It's also a great way to keep them interacting with you as they grow -- and as any teenage parent will tell you, that's a challenge in and of itself.
Still not inspired? Try paying bills together as a family. Show your kids your finances, and explain how you manage them. Don't forget to illustrate clearly where and how you put your savings. Kids must learn that saving money is a lifelong habit, and "pay yourself first" is a common refrain that kids will understand and appreciate. It's also an excellent opportunity to teach your kids about the responsible and smart use of credit. Demonstrating how credit can harm -- and help -- them is an essential lesson that every kid should learn before they take on their own loan obligations. And with college, that may be as early as age 18.
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