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Helping Your Child to Budget Effectively

 

budgetOne of the daunting feelings that come with parenting teens is the sense that they are reaching a point where they don’t need you anymore. Yet, while they may be acquiring independence on many levels, a worrying number still don’t know how to budget. Teaching them this is one of the last great gifts you can give. It will help them avoid financial disasters, set them up for a more successful life, and help to protect your own finances by ensuring you don’t have to keep bailing them out.

Set an example

As with so many other things, the first way a child begins to learn about budgeting is by watching you. Make sure there are lots of opportunities for this. It can be as simple as taking your kids to the supermarket and putting them in charge of working out which products offer the best value. Look at receipts with them and discuss what was a bargain and what wasn’t. If you’re thinking of buying a larger household item, ask them to search on the Internet for good deals and then discuss what they find. Make sure they’re present when family budgets are being drawn up, and ask them for suggestions. Children are always more interested in learning when they can see that it’s empowering.

Provide an allowance

Kids need to learn how to manage money before their lives depend on it, so provide them with an allowance. Initially this can just be a small amount of money for sweets or comics, with the lesson being that spending it all at once means no treats later in the week. As they get older, shift the allowance to a monthly pattern (so it resembles a paycheck) and make them responsible for more and more of their own things, such as buying clothes, sports gear, music and gas.

An allowance system only works if it has a hard limit. Don’t be tempted to bail your kids out if they mismanage it, no matter how much they beg. After all, it’s better for them to be miserable about missing out on a band they want to see now than it is for them to be unable to pay for food when they get to college.

Discuss college outgoings

One of the reasons young people often get into financial difficulty when first at college is that they’re not aware of all the things a budget needs to cover. Before they leave, go over this with them and draw up a ledger that outlines the most important concerns (reflecting what’s important to them as well as to you). If you didn’t go to college, bear in mind that money will be needed for things like books as well as living costs. Make sure your figures are up to date.

Look to the long term

A kid going to college provides a good opportunity to talk about long-term financial issues and the importance of choosing a major that will lead to a good career. This doesn’t necessarily mean aiming for the most lucrative careers because it’s about balancing something realistic with something your child will enjoy enough to stick at. If your child wants to pursue a direction with no clear career path, discuss the importance of making practical plans and being able to take care of things like health insurance. Make sure it’s understood that you won’t always be around to help.

Emergency options

If the worst comes to the worst and, despite all your efforts, your child runs out of money at college, remember that you can always use a service like Trans-Fast remittance to transfer emergency funds at speed. Sometimes teenagers are hit by expenses no one could have predicted and they shouldn’t have to suffer for that. If they’ve simply been careless, make it clear that the money is a loan.

parenting, Wednesdays parent

Wednesday’s Parent: A Crash Course in Money Management

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money managementBudget? For teenagers. Why on earth would they possibly need to learn to budget? Their every need is met: food, shelter, clothing and for most entertainment. The baby boomer generation has made sure that our kids want for nothing and their every need is met immediately. What is wrong with this picture? Simple. We’re raising a generation of children who end up drowning in debt as adults.

Before you send your child off to college and expect them to understand how to budget and not abuse credit, it’s time to give them a crash course in money management.

Money 101-The difference between wants and needs

This is the foundation upon which every other lesson is built upon. We all say it, especially our kids: I need (fill in the blank). But is it a need, or a want. Most of the time, it’s a want. And if it’s a want, you can 99.9% of the time, do without it. Understanding this concept will help your kid learn to spend wisely and if you teach them to ask this question before they make a purchase, it’s going to change their lives.

Money 202-Don’t spend more than you earn

Adults (or most adults) understand this concept. If your child doesn’t learn this before college, it is open season for college students by the credit card companies. It’s easy to “swipe” the card and rationalize they can pay for it later. Before long $20 becomes $50, $50 becomes $100, and $100 becomes $1000.

Money 303-If you want it, you have to earn it

This is an easy lesson to teach your kids, but many parents don’t. Start early with chores, then summer jobs, and then encourage them to save for that high ticket item. Purchasing a new car for your teenagers doesn’t teach them this lesson. Instead, consider a used car that needs some work, but only if they contribute some of the funds.

Money 404-Don’t depend on a rich benefactor

We’ve all seen those shirts in the mall that say: “My kid thinks I’m an ATM”. This is the mantra of today’s generation. If I want it, mommy and daddy will get it for me. If I want to go to college, mommy and daddy will foot the bill. Encourage them to always have some “skin in the game” when it comes to important purchases. If it’s their hard-earned money, it will have more value.

Graduate Course-Create a budget and stick to it

You can start early with an allowance and some weekly spending money for essentials. Explain to them that this is their money but it’s their responsibility to use it wisely. When it’s gone, it’s gone. They will have to wait until the next week before their funds are replenished. It’s as simple as sitting down with them every week and writing down how much money they have and what they will need to spend it on.

Kids who learn these lessons before college will be happier adults. They won’t become a slave to debt and they will work for everything they acquire in life.

For more budgeting tips read Wendy’s blog:

6 Circus Lessons for Balancing the Budget

college costs, parenting

Cash management strategies for college-bound students

 

cash management strategiesParents hope the basic principles they instill on their kids – honesty, confidence, work ethic and compassion – will accompany them to college. After that, those life-enhancing habits that usually come through experience are just a bonus. Stable cash-management strategies are among the most elusive traits for high schoolers. While some work their first jobs in high school, college-bound students struggle with long-term budgets, disciplined spending and volunteer restraint.

Your child will learn money-management strategies one way or another. Why not start preaching disciplined financial values early? You could save her countless nights of eating ramen for dinner. Whether your pride and joy struggles with credit card spending, paying bills on time or maintaining a budget, these cash management strategies will enhance your child’s college experience.

Budgets Don’t Budge

According to Bankrate.com, 40 percent of American adults don’t have a budget. With the country drowning in debt, it’s time parents re-embrace the basics of sound personal finance. Rule number one: draft a budget. Structured spending is particularly important in college, where books, clothes, sporting events and parties threaten to suck the life out of any bank account. Whether on scholarship, working or receiving allowance from home, the ability to allot a set amount of money for life’s necessities is an invaluable skill.

Emergency Plastic

No parent wants their kids to be poor, hungry and alone at college. While such a scenario is unlikely, many react by shipping their scholars so-called “emergency” credit cards. By the time they reach their final year of college, 91 percent of students have at least one credit card, according to CBSnews.com. While you envision this card as a last resort, your child may see it as a remote portal into your wallet. If your child has a credit card, discuss the proper uses and potential consequences, such as a late-payment penalties, interest and a poor credit score.

If It’s Broke, Fix It

Experience is the best teacher. As your kid enters the next chapter of his life, maybe its time to cut off the allowance upon which he has depended. Working teaches the value of a dollar and instills a heightened sense of responsibility. According to Kansan.com, students who work part-time jobs get better grades than students who do not work. As they balance work and school, students develop time-management skills and build their resumes.

It Rains at College

The last thing a college student wants to think about is a financial safety net. After 18 years of living with parents, students relish the chance to break free of restraint, restriction and reality. Life happens in college and a savings account can be a vital safety net. Teach your child the merits of saving for a rainy day. You probably have every intention of supporting them financially in a time of need, but later in life, they’ll be on their own. Or, worse yet, they will “boomerang” home after college. Better to learn that lesson with room to fail.