Do You Have a Financial Road Map?
Teach your children well and they will benefit for a lifetime.If you want to teach your kids about money, it will serve them well to work off their own mini-budget outline. This way they can understand where money comes from and how much things cost. Quarterly or period-based budgeting is probably the best thing you can instill early on in a child’s financial life. Give them small tasks to handle. Once they’ve established an annual budget you can break it down into quarterly or 12-week cycles. Once your child has proven they can make and manage their budget responsibly over that period of time, you may want to increase their funds for the following quarter.
Some goals include: balancing their own checkbook or balance sheet, making systematic savings deposits, contributing a portion to charity or religious purposes, and maintaining or living within their budget. There should be a direct correlation between how well they perform with a budget, managing their money, and how much independence they are given to spend their money.
Once you establish this budget, stick to it. When your child wants an outfit or an item for a special occasion, the first thing that you should ask them is: “Is it in the budget?” If not, teach them to start saving for it. It’s okay to determine agreements on percentages that you and the child will pay, but the idea to bring home is the reality of how the money is earned, managed, and saved. This works much better than the old battle cry “Money doesn’t grow on trees!” By empowering your children to make decisions about money, you will have a better chance of helping them understand the importance of good financial management.
It’s important to have a review of the budget and at some point, you may want to introduce them to your family budget, so they can see where the money comes from. To keep telling them that money doesn’t grow on trees has not proved to be an effective strategy in teaching kids fiscal literacy.
Make sure you give them the proper praise when it is earned and try to avoid using their allowance as a form of behavioral control or a punishment; this will defeat the purpose entirely. The purpose of their allowance and budget is to develop financial life skills. Stay focused on financial management and fiscal literacy and the rest will usually take care of itself. Make sure they understand how their budget impacts the entire family budget. Learn more about running your family finances like a business by purchasing Ivy League Wealth Secrets Now.
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