Teaching Your Children to Save and Budget

The concept of earning and budgeting money is foreign to most kids. Teaching your child to budget is an important step in their lifelong journey through the world of finances. We all know that money doesn't grow on trees, so here are a few tips to teach your children how to budget effectively.

Make your kids do chores. I'm not saying this to be mean. Before your child can learn to budget, they must have money to work with. Assign chores to your children and give them a set amount of allowance each week. Have them do their household chores and pay them for their work at the end of each week. If all the chores are not completed, do not pay them their full allowance. It will help them to learn the value of a dollar.

Get your children a piggy bank. This will be a vital tool in helping them learn about saving money. A simple jar will do or you can get high tech with the kind that makes a noise and swirls the coins around the appropriate sized holder. Those make it easy to remove and roll to take the money to the bank.

If you want to step it up a notch, money jars can be a very useful learning tool as well. Give your children options with a few jars - one for everyday spending (ice cream man, renting a movie, etc.), one for saving for big items they must have (video game, board game, etc.) and one for long term savings (vacation spending money). You child can deposit their money in whichever jar they'd like, or divide it our evenly among the three.

Try to help you children figure out how long it will take them to save up for something they really want. If it's something that is going to cost them a lot, help them figure out how many weeks of allowance they will have to save in order to purchase that big item. They can then decide if it's worth it to save, or if they'd like to spend the money they have on other things.

Open a savings account for your child and put their name on it with yours. This will help to show them that it is important to save money. As they grow, teach them to deposit some of their birthday money and gift money into their savings for the future. Be sure to show them how their money is growing in their savings account and explain to them it will only keep growing as long as it's in there. When they are old enough, they will enjoy going to the bank with you to put money into their very own account.

Once in a while, let your child sit with you as you go through your own bills and statements. Let them see what it is like to work on a budget. If you keep excel sheets, show them those as well. Anything to start instilling knowledge early will help them on their path later in life.

Most importantly, be a good example. If your child sees you out spending like crazy and pulling out credit cards whenever you need something, they will get the wrong impression. If they see you using good spending and budgeting habits, they are bound to pick up and use those habits down the road.