How Can Children Learn Budgeting Basics?

By Author: Anderson Wilson
Total Articles: 17
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Children should learn how to manage money and this should not be left to destiny or be learnt by trial and error later on in life. With children and more so with teenagers it is never easy to teach, they simply don't want to be taught. However, they should know about money! So, what exactly should they know?

Children should know that money:

* Is a scarce resource and has to be used judiciously.
* It has to be earned and doesn't come free!
* How much you want and how much you have will not always match.
* It is not everything. It is important but not the only important thing in life.

You've to get them to learn on their own in an easy and fun way. This will help them take pride and joy in managing money. A good starting point is a well designed and executed allowance plan! Give your children a monthly or daily or weekly allowance! Children who are ten years of age are usually ready for an allowance plan.

Regular (monthly/fortnightly/weekly) allowance money can be given to them to help them utilise it for any purchases that they might need, like a geometry box or a ...
... favourite toy. One could start with some basic expenses like say, snacks after school. The child may want to buy a drink or grab a quick snack from the canteen during or after school. Sit down with the child and find out how much he normally would spend on his snack every day. Let's say he spends twenty rupees on the daily snack. For five days a week he would spend hundred rupees. So every Monday you could give him 120 rupees (20% extra for the child to use his discretion on what to do).

Now, it is simple, instead of giving him twenty rupees everyday or whatever he asks for now and then, you are giving him 120 rupees every week to manage his snack expenses. If he spends more on his snack because he has more cash in his pocket, he will learn that money is a scarce resource when you firmly tell him that his share of expense for the week is over, if he wants a replenishment in the middle of the week. You could gradually increase the amount and the expenses he can handle himself. The allowance could be linked to some chores in the house.

All basic work, like putting away books and keeping the room clean are to be done anyway and cannot be linked to allowances. However, some work which generally children are not expected to do - like clean the interiors of the car once a week, clear the table after dinner and put away washed vessels, use cleansers and wipe clean furniture once a fortnight etc., can be linked to allowances.

You will have to insist that the work should be completed to be eligible for the allowance. Shoddy work should not be condoned. A sense of seriousness has to be instilled in the process. This will teach the child that money has to be earned and understand that time and effort goes into earning money. Do tread the line carefully though and do not encourage children to demand money for small favours you request from them.

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