How to Teach Your Children to Budget, and Stick to It

If you have children, you naturally want them to succeed in life, but what's the best way to give them a helping hand without coddling them too much? As a single parent of three daughters, I learned the answer by trial and error. More error than trial, but with persistence, I worked something out. At first, I wanted my kids to have everything. The newest toys, the best clothes, etc., but I soon learned that by doing that, I was only giving them a distorted view of life. They expected to always have the most popular item around with no understanding at all of the cost to me.

When they were young, it wasn't so bad, although I had to always buy things in threes or else I'd end up with the most unbelievable and unrelenting complaining about unfairness. Buying in triples became the only way to maintain my sanity. So, as the girls grew and began to experiment with fashion, footwear, jewelry and makeup, my salary couldn't keep up.

This was when I quickly realized that I was doing them a disservice by giving in. Not only was I going broke, but they had no concept of money and budgeting. As soon as they were old enough (toddlers), I'd had them doing simple chores in exchange for a small allowance. As they got older, the chores became more complex (and I confess that I chose chores that I didn't want to do-after all, I'd been doing everything for years and I deserved a bit of a break), and the allowance increased. This worked a bit, but I had to keep nagging to get the chores done. I hate nagging, so I decided to initiate a more real-world situation.

I made up a chart of chores that were assigned to each girl (they rotated each week for fairness) and had a paper token that would be placed in an envelope on the chart for each chore that was completed each day. If the chore wasn't completed that day, there was no token awarded. This got rid of days without chores and then a frantic 'make-up' at the end of the week. I wanted a clean house every day, not just once a week. At the end of the week, the tokens were counted and money was paid per token. I was the overseer to make sure the chore was actually done so no one would try to sneak in an undeserved token. This system actually worked. I kept this going until the early teen years, then I decided to try something else.

A new allowance system was needed because my girls didn't have a clue about how to budget money. As soon as they earned it, it was gone. Then, the proverbial light bulb went off. I needed to make them responsible. What a concept! I kept the chores-for-allowance system, but this time, I rewarded them at the end of the month, instead of each week. The reason for this, other than making sure the chores were done, was so that I could give them a lump sum that had to last an entire month. Forced budgeting. Plus I gave them a lot more money. The qualification was that this money was their regular allowance plus a 'house keeping' allowance. They were now responsible for buying things above and beyond what I would supply. I would buy the necessities; toothpaste, toilet paper, shampoo, food, etc., but they were now responsible for all of their clothing, underwear and socks included. Any food they wanted that I didn't supply, any additional school supplies, hair accessories, make up or other items were now to come out of their money.

If they spent all of their monthly allowance, they had to wait an entire month for more. This new system had a very rough start. At first, they saw the money as a huge amount to spend on clothes, and spent it all the first day. This caused several incidents of begging for loans against next month's pay and cries of 'it's unfair, why should I have to buy socks and underwear?' I had to reiterate that the increase in money was to cover these items, and if they didn't like it, then we could go back to the lesser amount. They didn't like the idea of less money. I explained that if they budgeted well, they could actually end up with more money for clothes.
It honestly took them a few months to get the concept, but they finally did. I think my main mistake was starting the system a bit too early. They weren't quite mature enough to understand the incredible responsibility of taking care of their own 'house keeping'.

They are now in high school and we still use the system, but now to supplement their impulse spending, they earn a little extra money by baby sitting or doing other odd jobs. They are surprisingly savvy about discounts and sales and can generally come within a dollar or two of estimating their purchases. So, after a few rough starts, I think my daughters are fairly well prepared to meet life head on.