Teaching budgeting

Ian Munro
Ian Munro.
They have their allowance and their piggy bank - now a few ideas for teaching budgeting and managing spending when they’re a little older, writes Ian Munro.

Start by ensuring that everyone is clear about what you’ll be expecting them to use their allowance for and what you’ll still be providing.

This is important for pre-teens upwards. Are they to pay for clothing (all or just leisure?), all entertainment or only non-family entertainment, family holiday spending, lunches, school trips, sports costs?

Letting teens know something about the family income and budget will show them that the same rules apply to you, too. Show them the power bill, have them add up the weekly payments and spending and work out how much is left over.

It’s a good idea to help older children make a purchase plan for something they really want. Show how weekly savings add up; how much lawnmowing or babysitting money an item will cost. Initially, the goals should be short term, otherwise it might seem as if they’ll never be reached.

Offer an incentive by volunteering to make a contribution towards the purchase, for example $5 for every $20 saved.

She wants a particular brand of jeans that cost more than the perfectly adequate pair you’re prepared to pay for. Allow her to top up from her savings to buy them.

He’s making as much use of the family car as you are. Collect a monthly payment from him towards petrol, insurance and registration.

Play Monopoly with the pre-teens and introduce mid-teens to the delights of op-shops.

Let younger ones help make decisions on price and size when grocery shopping. Have them spot the coupon or instore specials. Show how if you buy this brand rather than that,  money will be left to buy something else, perhaps a treat.

Let an older child have all or half of the shopping list and, working to a money limit, take charge of the buying.

Teach a teenager about hire purchase by extending them credit for a purchase and charging standard interest, collecting monthly payments, talking through the issues if it all goes wrong and even repossessing if it comes to that.

You mightn’t be popular but they’ll remember that lesson and you’ll have saved them from gaining a poor credit rating while learning one of life’s hard lessons.

I strongly recommend that you let them experience the consequences of unwise spending, of not budgeting, of frittering money away so that there’s nothing left when something they really want comes along.

Be sympathetic to their plight, offer to help them draw up a savings plan, but resist the temptation to either lecture or bail them out. Start bailing them out now and you’ll still be bailing them out in 20 years’ time.

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