KIDS & CASH: CREATING A BUDGET

Budget - to some people just hearing that big word sends them into a convulsion as they wail, “I just want to spend!” Are you one of them? Now be honest! If you think you are, you first need to overcome your budget phobia before you can even teach your kids on how to budget. This is because children learn so much from their parents - which is why they are often called “Little Sponges”!

As children, we pick up everything from mannerisms and beliefs, to bedtime habits and financial skills. Yes, even financial skills! If our parents lived paycheck to paycheck, chances are we will too. Similarly, if we watched daddy charge everything on a credit card, more than likely we’ll be charging everything on a credit card as well.

Therefore, take this opportunity to get your kids involved in your budgeting. If you are budgeting for the first time as well, relax a little! Learning together with your kids can be a fun adventure. We will show you a sample budget, as well as give you three scenarios where you can seamlessly introduce the wisdom behind budgeting to your kids.

Johan’s budget
Johan is your typical kid who goes to school, has hobbies, enjoys going to friends’ birthday parties and constantly plays with his mobile phone. Yes, even ten year old kids have mobile phones nowadays! Johan’s parents give him a monthly allowance of RM100 for all the extra chores he does around the house.

Let’s see how Johan makes sure he has enough money for his school pocket money, stationeries for school, prepaid credit for his mobile phone, his hobbies and other items he may want:

Three scenarios to introduce budgeting

Peer-pressure scenario
Kids always want what their friends have. Heck, even adults want what their friends and colleagues have! Therefore, that saying to “never keep up with the Joneses” applies to your kids as well. So the next time your kids demand to have something that their circle of friends are having, use this as a conversation-starter for how they can manage their money, “Do you really want that toy? Or do you just want that toy simply because others are having it too? How are you going to get it?” If that toy is really as important as they say it is, match any amount of money they are able to save up within a particular time period. But when your kids realize simply wanting something won’t make it magically land on their lap, it may perhaps become less important to them.

Supermarket scenario
Planning the next supermarket outing is a great way to teach kids about budgeting. Let them know the exact amount of money that will be spent and ask them to create a shopping list as well. They will have to look in the refrigerator and all the kitchen cupboards and figure out what the family needs for the entire week. Once they have created the list, sit down and go over it with them. When you go to the supermarket together, have your kids use a calculator to keep track of how much each item costs. This will show them that some items will have to be returned to the shelves if their budget has been exceeded.

Family budget scenario
Many parents choose to not divulge the family’s budget to their kids. This is highly unfortunate because being honest about the family’s budget is the best way to teach your kids about financial planning. Show the bills to your kids and have them calculate the total amount that has to be paid. Explain to them that if you add an expense, you will have to take away another expense. Make them feel important by allowing them to share their thoughts and play a role in the family’s budget.

This is when you can work together with your kids to cut down on  some spending. They may even be more understanding when you have to say no to a plea for a new toy. What better way to educate your kids than making them realize that the family’s monthly electricity bill costs as much as 50 comic books; and perhaps this would motivate them to turn the lights off when they leave a room.

A few more tips…
Please remember that every family is different as not every parent can afford to give their kids a monthly allowance (or at least an allowance of RM100 a month). However, it is very important to understand that the fastest way for kids to learn about money and budgeting is to let them pay for things using their own money. So help your kids in saving their money to buy their own toys. They’ll probably take better care of their toys too!

Finally, discuss money issues on a regular basis with your kids. As in the previous articles, help your kids make goals, money plans and learn how to budget and save. If you start teaching your precious ones early about money smarts, they will have a great head start on their future.

The next lesson will be on tracking your spending. So stay tuned for more. Download and make copies of our Budget template from the online tools segement today!