As a parent, you are responsible for teaching your child what they need to know in life. Knowing how to manage your money wisely is one of the skills that will be most useful to him over time. From childhood you can show him how to spend and how to save, if you can make him understand how to balance these two factors well, you will probably save him from a future of economic difficulties.
Steps
Step 1. Lead by example
Share your budget management with your child, show them how you compare prices and how you save. Take it to the bank with you so it can see you pour money into your checking account. Tell him step by step what you are doing.
Step 2. Get it involved
- Ask your child to help you find the items and read the prices when you go to the greengrocer, so as to find the best offer. You could also leave him a sum of money and ask him to organize your shopping list in that amount. Ask him to check what's available and what's missing in the refrigerator and pantry to write down purchases to be made next week. While shopping, give him a calculator so he can check if you are exceeding your budget.
- Encourage him to research discount coupons or current offers.
- Check your monthly budget with the children, especially if you are already teaching them how to save, for example if you ask them to pay attention to the little things like turning off the light when they leave a room. This requires deep trust, so explain to them that they absolutely won't have to talk about family budgets with their friends at school.
- Plan your next vacation with your children, leave them the task of finding the best price for your flight, hotel and car rental.
Step 3. Give him pocket money
Decide whether or not to base it on their participation in housework. (See in the Tips section)
- As soon as they begin to understand the function of money, give them a small amount.
- Give him pocket money with a small receipt and also include coins, so that he learns to organize his money in different containers, even according to the different value.
- When he grows up, encourage him to find some part - time jobs. It will be useful not only to make him understand how to manage money but above all to learn how to organize his time.
Step 4. Provide him with savings containers
- Buy a piggy bank for your children, where they can temporarily keep their savings.
- For older children, use clear containers, such as glass bottles, so they can visualize the amount of money they are saving.
- Open them a savings account to deposit the money they have accumulated over time. When they are old enough, explain how interest works.
Step 5. Make it a fun experience
- Your teachings on managing your finances don't have to sound like a tedious sermon; they must be fun. While trying to explain a concept, use nice illustrations that your children will remember.
- Buy board games, such as Monopoly, which can make him understand the value of money.
- Look for some thematic comics, perhaps featuring the story of King Midas, The Adventures of Tom Sawyer, or look for financial-themed children's books, such as the book "Rich Father, Poor Father" suitable for teen readers.
- Introduce them to websites or themed children's books. Assign him the role of assistant in the drafting of the monthly family budget, in the compilation of the checks, in the management of the bills to be paid.
Step 6. Create your budget together, which also includes short-term or long-term goals, and a savings plan, albeit a small one
Think for example of a budget like this:
- Donate 10% to the Church or charities
- Invest 20% in savings accounts, escrow accounts or savings bonds
- Save 30% for the future purchase of a special toy, or for something you want.
- Spending 40% on things he needs now or for his daily expenses, such as snacks, school supplies, clothes, birthday gifts, and so on …
Step 7. Set limits
- Don't give him any more money if he runs out of budget too quickly, let him experience the consequences of his actions now that he still lives in your home. Credit card companies have realized that students are great customers, even if they don't have jobs, because parents are always ready to pay their debt when they have problems. If you teach your child how to manage expenses right away, you could avoid these kinds of problems in the future.
- Your child doesn't see everything he asks for. Managing expenses means making choices. If he has the habit of having everything he wants, he will never understand what the priorities are, knowing how to recognize them is the basis of proper resource management.
- Teach them to say "no" and how to resist the urge to buy.
Step 8. Keep a ledger or diary together where he will record his expenses. Check this periodically
Method 1 of 1: For older children
Step 1. At the beginning of the new year, sit down with your child and discuss how much you usually spend on the things he needs
Make a budget plan that includes amounts earmarked for clothes, games, books, gasoline, if it's big enough to drive, and school expenses.
Step 2. Add the established amount of money to your checking account, either all at once or broken down from month to month
Step 3. Let your child be responsible for their own purchases, choosing clothes, etc
Tell him that what he can save on expenses he can use for other future purchases.
Step 4. Encourage older children to find a small job so they can increase their budget and save money
Step 5. Check your budget every two months and make adjustments if necessary
Step 6. After a couple of years, when your child has managed to save a little, gradually decrease the amount of pocket money, so that little by little he becomes economically independent
Having to spend their money rather than yours will be an incentive to control expenses and manage them more wisely.
Advice
- Try to explain the value of each coin and bill to him.
- If a five-year-old child receives four euros a week and manages to save 20%, at the end of the year he will have around 40 euros. This amount is enough to buy a small share on the stock exchange. With an interest of 8% after ten years it could reach 80 euros, maybe at that age it will start thinking about when to buy a moped. If he can have an extra euro a week for the whole year, always investing them, he could reach around 1000 euros when he is a teenager.
- Using cash for your purchases is much more educational than using debit and credit cards when your children are still young. At first you could give him cents, or banknotes from board games.
- If allowed by the banks, try to open a real checking account for teenagers, let them learn how to manage their balance sheets, interests, etc. It is important that they learn as soon as possible, and especially when they still live in your home and the consequences of their mistakes will not be too heavy.
On pocket money
- As children grow up their privileges and responsibilities increase. The ideal pocket money is that allows the child to be able to buy small things (otherwise they will not give them value) but limited enough to allow them to buy more expensive things only after accumulating the savings. The pocket money will have to increase with the age of the child, it is a good idea to make the pocket money increase coincide with the birthday and it is important to keep the same scheme for all children.
- One solution would be to raise one euro for each birthday, for example, a five-year-old will receive five euro a week.
- Or increase one euro for each school year, a fifth grade child will receive five euros a week.
- When you think your children are old enough, give them a monthly allowance and not a weekly allowance. They will learn to manage expenses related to a longer period of time.
- When they are teenagers in giving them pocket money you can try to divide it with them according to the type of expenses needed, the amount to be allocated to clothes, snacks, school expenses, etc. If these expenses are part of your monthly budget, show them how you record them and ask them to do the same as well. You can gradually loosen your control over your children's decisions if you understand that they have learned to manage resources the right way. Some families have come up with an effective solution, letting their children be responsible for the purchase of their own clothes but also for the costs related to washing.
- Some parents believe that their children need to earn their pocket money, so they release it after doing some housework; but this could lead them to think that they are not taking care of the house because it is their responsibility but only because they are being paid to do it. Furthermore, given that the experience comes from practice, denying children pocket money as a punishment for not doing something takes them away from the constant learning of economic management. The best solution could come from the combination of these two thoughts: leave them pocket money regardless of their housework and decide whether to increase it or not based on the help they will give.
Warnings
- If one method fails, try another. Not all children learn the same way.
-
Be careful if you give pocket money advances or deliver it before the set date. Children, like adults, may be attracted to the idea of receiving a payment before having done the work or knowing that they can request it before the deadline. It is important that they do not learn to spend the money they have not yet earned.
An alternative method could be to leave in a prominent place, for example attached to the fridge, a list of tasks to be performed that your children will have to unmark as they complete them. At the bottom of the list will be the total amount they will be able to receive for completing all that has been requested. With a little creativity, you can imagine which job requires more effort and reward it with a different score, and therefore a higher final payment. In this way your children will have very clear how the value of their reward is directly proportional to that of their commitment. The required commissions could be simple actions such as buying an ice cream (awarded with a star) or taking a friend to sleep in his house (two stars), going to the beach or swimming pool (three stars) or spending an internal day with the parents (four stars). stars). It is an effective method of giving bonuses for which they have to wait until they have completed the entire form, especially now that the "buy now / pay later" mentality is spreading. This technique can be highly educational
