The younger children are introduced to the concept of money management, the more likely they are to handle their finances better as they become independent. Giving an allowance and encouraging your children to save a percentage of it is a great place to start but is not enough for long-term financial well-being.
Make a budget, and don’t forget the ice cream! Although children don’t have bills or expenses yet, the concept of budgeting should start early. Transfer your costs for movies, birthday parties, local events or even treats at the store to your child’s budget. Give them an allowance and options to choose from on how to spend it. They will learn quickly that we all have to pick and choose where to spend our precious dollars.
Set financial goals and stick to them! While budgeting is great for the day-to-day expenses, it doesn’t really translate to those big dollar items we like to splurge on. Here are some ideas of financial goals from my household: a new skateboard, an Xbox video game, a day of snowboarding, or a trip to Build-a-Bear Workshop.
Save for an emergency or rainy day! Set boundaries for saving money when a child receives an allowance, extra chore money, or even birthday or Christmas money. Some parents choose to go with a flat percentage (my dad held me to 10% from day 1) or not spending any money until a flat amount is saved (say $5). The earlier we get accustomed to saving, the easier it is to not spend every dollar we bring home.
Lemonade Stand Start-Up! Last year my two young children wanted to have a lemonade stand during our neighborhood garage sale on a rare hot summer day. We started out with writing out the cost of all the supplies and they were off and running. My son set up the furniture while my daughter put her art skills to work on signage. As the money flowed in they had to hold it all in a shoebox and resist the urge to buy our neighbors old toys and sports equipment. When the day was done we sat at our dinner table and counted the profits. They subtracted the expenses and handed that money over to me and divided the remainder for themselves. It was an excellent lesson and actually a lot of fun to do with them.