Teaching Kids How to Budget

When you teach your child how to manage money, you give him or her a priceless gift. While some kids are “intuitive” money managers, there are many who completely lack natural talent in this area. For instance, some kids just spend every cent they get their hands on, never setting anything aside for future purchases, savings or charity. In this way, they are exactly like many adults in our culture! Of course, lack of money-know-how can cause lots of pain in adulthood. Running out of funds, falling into debt, gambling away hard-earned dollars and so on, lead not only to personal distress but also to marital stress and family problems. For this reason, it is the job of every parent to prepare children for the economic side of life.

If you want to impart basic budgeting skills to your child, consider the following tips:

Necessity vs. Luxury
Kids learn by example and by direct instruction. You can teach them to prioritize necessities and budget for luxuries by letting them see how you yourself do this. For instance, if your child needs a new pair of proper-fitting shoes (a necessity), you won’t want to have to say to her, “I’m sorry we can’t afford shoes for you right now. We just spent all our money buying that boat you kids wanted.” In fact, poor budgeting is something that children can see for themselves, without you pointing anything out. If, for instance, the child finds out that there is no money for shoes but sees that your spouse – the child’s other parent – just bought you a pure gold bracelet for your anniversary present, the youngster will learn that people buy what they like and don’t worry too much about what they NEED! It will be necessary for you to model the principle: “necessities before luxuries” before you can ask your child to live by it.

Assuming that you are modeling the correct attitude, you can help your child learn about it through explicit instruction. Tell your child something like this: “You’ll want to have money for the things you NEED as well as the things you WANT. Make sure you have what you need first, but always set aside a little of your earnings to buy things that you just want. You can set aside 10% of your income for charity, 10% for savings for big and special things you want to buy (like cell phones, computers and/or cars for older kids and special toys for younger kids), 10% for weekly treats (drinks, food, magazines or whatever) and 70% for your necessities.” Give your child lots of examples that are relevant for his or her age. If draw it out on paper – use a pie chart with different colored sections for clarity. Remember, a picture is worth a thousand words! The older your child is, the more information you can give, including a detailed breakdown of living expenses (rent, transportation, clothes, toiletries, etc). Younger kids and any child who is still living at home and not paying you room and board don’t necessarily have real “necessities.” However, as they get older, you can help them have experience of managing a budget for necessities by making them responsible for paying for car expenses (their own license, gas, lease or whatever applies to their situation) or their own phone bill and so on. It doesn’t matter whether the money they are paying with is money that they earned themselves or received as an allowance from you – what you are teaching them at this point is how to MANAGE income. You can teach them how to earn it another time!

Planning and Saving
It’s important that your child has some real money to learn with. It’s safer for kids and teens to make mistakes on small budgets than to start the learning process in adulthood. Even a very young child can begin learning basic budgetting concepts using his or her small allowance. For instance, take the child shopping and let him or her pick out a treat either with allowance money or even “treat” money that you provide. The child must figure out what purchase is affordable. The chocolate bar may be over budget, the potato chips may work, perhaps a soda and a pack of gum might be affordable, the fancy candy is definitely out of reach. Instead of YOU doing all the calculations, allow the child to do it if the arithmetic is within the child’s easy grasp. Teens can use a combination of allowance and earnings to manage their budget. Make them responsible for paying their cell phone bill or some other regular financial responsibility and help them to figure out how to set aside savings to purchase big ticket items they are longing for. You can provide incentive programs if you like: offer to match them dollar for dollar in order to help them purchase some important product.

Once your child has a source of income – whether that is an allowance or a part-time job, another source of income or some mixture of things – help him or her to open a bank account. This is all part of the money-learning experience. Especially if signicant funds are involved, you might encourage more than one bank account: a savings account for big purchases down the road, a checking account for readily accessible cash and an accountfor charity funds. Later on, if the child is ever self-employed or running a small business, make sure that there is a savings account specifically for required tax payments. This way of organizing money can help the budget work smoothly and automatically.

In teaching kids to manage a budget, it is essential that you do not bail them out when they make errors. O.K. – maybe just once. But you want them to learn through experience that when you run out of money, you run out of money. There is no more. Discourage borrowing from you or friends – this is really just a debt mentality. You want your kids to thrive within their budget. If there isn’t enough money for what they want, they should be encouraged to earn more money, instead of going into debt.

For instance, suppose your 15 year-old daughter bought herself a sweater with her savings. At the end of the purchase, she has only twenty dollars left in her account. However, she sees some boots she just MUST have right away and begs you to loan her the ninety dollars she’ll need, promising to pay you back over a three month period. DO NOT COOPERATE! She should have been looking ahead when she bought the overpriced sweater! If you don’t bail her out now, she’ll become a better money-manager for life. On the other hand, if you do allow her to go into debt because of her own bad planning, you are helping her to have a life of credit-card angst and suffering.

Teens and Credit Cards

One way of helping a teen become financially responsible is to allow him or her to have a credit card. The trick is to make the teen fully responsible for its management. The child must have a bank account with money in it and must be responsible for keeping track of bills and payments.

By giving young adults limited financial control, parents are providing them with the opportunity to learn to make good decisions and to develop financial discipline.

Often, teens who are not earning their own money are unable to fully appreciate the real value of a dollar. For that reason, it’s best to allow your teen to have a personal credit card only after getting a part-time job or summer job that provides a financial base for its use. If this isn’t possible, however, you can provide a “salary” for “hired services”  the teen provides for you in the home (i.e. tasks that go beyond normal family responsibilities like helping in the kitchen and keeping one’s room clean). Alternatively, you can simply give your teen a steady allowance that is meant to cover not only entertainment and snacks, but also clothing, toiletries, transportation and other necessities of life. The reason for this is to help the teen learn to work within a budget to handle a large range of expenditures.

Having said all this, there are clear risks in offering a teen credit. A parent may find him or herself in the position of needing to bail a child out of unmanageable debt. Teens are, after all, inexperienced, impulsive and naive (some more than others) – characteristics that can get them into serious trouble of all kinds.

Given this is the case, how can you know if your teen can manage a credit card?

Consider Your Teen’s Personality
Is your teen a natural spender or someone who is able to save for a rainy day? Does your child tend to be impulsive, buying things that he or she never ends up using or do you see evidence of well-considered purchases?

Conduct a Test Drive
Before handing over a credit card, try simply providing a larger allowance and realm of financial responsibility to your teen. See how the youngster handles that extra responsibility. Can he or she function within the budget without coming to you for shortfalls? Is the youngster content within that budget? Is he or she making appropriate choices (i.e. buying lunch as well as t-shirts, instead of just t-shirts?). Can he or she set aside savings for large expenses and needs? “Yes” on all fronts earns a credit card. Even one “No” indicates a need for more experience and maturity before involving the bank!

Communication Skills
If you and your teen aren’t on good speaking terms, be careful about handing over credit. Your teen can get a credit card independently when he or she can present himself responsibly to a bank. Communication needs to be open so that your child can ask you questions when they arise, ask for help when it is needed and keep you informed about personal finances. Although you should not abuse the privilege, it should be possible for you to inquire about the balance on a card that you have co-signed for and you should be able to access the account. If there is no reason for you to do so, however, then DON’T. If you didn’t trust your child in the first place, you should not have provided a credit card. If you feel the need to check the monthly statement on your child’s card, the child should not have a card. Hopefully, you waited until the child showed appropriate signs of financial maturity and credit readiness. If so, everything should go smoothly. As  your teen becomes a young adult, you’ll be able to complete respect his or her financial privacy.

Another aspect of good communication involves YOUR OWN communication with your child. Be very clear – in fact, put it in writing – what the child’s credit card is for. For instance, do you want your child to use the card to buy all of his clothing, outerwear, digital devices, restaurant food and so on and so forth? Let him know what YOU are paying for and what you want HIM or HER to pay for – be as clear as possible in order to avoid misunderstandings and conflict.

Finally, enjoy watching your child become a responsible adult!

Always Late

Some people are always late. Children, teens and adults can all be afflicted with the lateness syndrome. If you are always late, cure YOURSELF before trying to cure your child. However, if you’re a prompt parent dealing with an always-late child, consider the following tips:

There Are Many Reasons for Arriving Late
First, let’s differentiate between “excuses” and “reasons.” When a child says she was late for school because her alarm didn’t go off, she is giving an excuse. Blaming traffic, weather conditions, alarm clocks, losing things and so on does not actually explain late behavior – these are all excuses. A reason for lateness is a statement that actuallyexplains why the person is late. For instance, “I didn’t allow enough time for bad traffic conditions,” explains why traffic conditions caused the person to be late. There’s ALWAYS traffic conditions! Why does that make some people late while other people are still on time? Because some people allow enough time for things to go wrong and some people leave themselves no “wiggle room” for ordinary life events. Similarly, weather conditions happen all the time. Failing to allow for weather is what causes only some people to be late while others are still on time. In other words, people who arrive on time understand and utilize the principles of time management whether or not they are doing so consciously. They know that you have to allow for “unforeseen events” every time you make an appointment to be somewhere. If unforeseen events don’t happen, they’ll arrive a little early. They can prepare for that eventuality planning for it – bringing some reading material, handheld devices or whatever, to keep busy for a few minutes before the appointed time arrives. Chronically late people don’t want to wait. Therefore they leave at the last minute so that they’ll arrive “just on time.” This does not allow for the necessary “wiggle time” – they will be late a lot of the time.

There Are No Consequences for Arriving Late
If the school does not give detentions or other immediate punishments for being late, children may not feel that they need to be on time. Or, if the detention period isn’t unpleasant, then the child may not care that he or she received a punishment. Schools who are serious about having kids turn up on time, need to have serious consequences for failure to do so. Similarly, parents may need kids to be ready to leave the house at a certain time so that the parents can leave for work. Dawdlers and late risers can pose a threat to the parent’s job responsibilities. A child who causes the parent to be late because of his or her own slowpoke behavior, needs to suffer appropriate consequences. Use the 2X-Rule (explained in detail in Raise Your Kids without Raising Your Voice by Sarah Chana Radcliffe). Tell the child that if he or she makes you late in the future then there will be a specific punishment (name what that will be). Be consistent in enforcing the negative consequence and be sure that the consequence you are choosing is a true deterrent for the child.

Consider Specific Disabilities That Make Time Management Hard
There are various neurological deficits that can make time management hard for a child. Some children just can’t accurately judge the passage of time. Twenty minutes may pass while the child experiences it as if only a few minutes went by. Or the child figures it will take her minutes to put on clothes and make-up whereas it never takes her less than 25 minutes for the task. Some kids can’t judge how long it will take to dress, eat breakfast, clean up and get ready for the bus, despite the fact that they must do it every day. Keep in mind that many adults have the same problem! If your child has conceptual difficulties around time, he or she will need extra help. SIt down with the youngster and ask him or her to make guesses of how long each task takes. The next day actually time each tastk. If the child is overor underestimated, discuss the differnces. Help the child make a more realistic schedule and have him or her check off the times that are actually required for each task. Close monitoring for a few days may reveal a few “leaks” in the system – just a couple of places where more time must be realistically allotted.

Accidental Reinforcement
Sometimes a child gets a lot of attention for being late. A parent might call him, scold him, encourage him, help him, and otherwise be all over him all morning long to make sure he is moving on time. This can be a lot of attention! Children sometimes enjoy all the “help” and attention they get from their parents around the issue of arriving on time. Even if this attention is unpleasant (scolding, reprimanding, threatening and punishing), the child might “enjoy” it, because negative attention is better than no attention at all. So be careful to check your own behavior to ensure that you are not talking to the child a lot in order to help him or her be ready on time. Stop the reminders, the assistance, the threatening and all the other attention. Go have your own breakfast and relax. The child will probably beg for attention in the beginning, so you must be firm in your resolve not to give it. After awhile, the child will realize that no more attention is coming and he or she will begin to act more normally.

Arrives Late

Does your child have a tendency to arrive late to his or her commitments? Whatever reason your child may have for tardiness, it’s important that as parents, you don’t take the behavior lightly. Occasional lateness can easily grow into a pervasive negative attitude about time and punctuality. The sooner you can wean kids out of a tendency for arriving late, the faster you can instill more appropriate behavior.

If your child has a tendency to arrive late, consider the following questions:

Is Your Child Motivated? 
Lack of motivation can be a factor in chronic tardiness. For example, a child who is always late for school may be a child who finds school boring, demanding or just plain awful. A child who is interested in the lessons and the classroom environment, on the other hand, can’t wait to get to class! If you feel that lack of motivation is behind your child’s tardiness, then consider ways to make things more interesting for them. It may be possible to arrange a meeting with teachers. Or it may be possible to give your child a reason to arrive early (i.e. more time to play with the new electronic device you just bought him).

Is Your Child Disorganized and Forgetful?
Consider the possibility that your child can use some help in arranging and systematizing his or her schedule. Not knowing where things are, forgetting appointments and schedules, and scrambling to get ready can all be causes for habitual tardiness. Get your child a calendar as well as a to-do list. Help him or her remember commitments through occasional reminders. And instill the habit of checking the night before if everything is ready for a trip. Adequate preparation can go a long way in cutting tardiness among young people.

Does Your Child Respect People’s Time?
Some children, especially teenagers, are prone to arriving late because they don’t value the time of the people they are about to meet. Perhaps they are confident that the other person will wait —- an event can’t start without everyone present, right? Or maybe they just don’t care if the people waiting for them get offended or annoyed. If this is the case, then it’s best parents teach children how important time is to a lot of people. In the same way that they don’t want their own time wasted, neither should they waste other people’s time.

Does Your Child Underestimate Preparation and Travel Time?
Some children are sincere in their desire to come on schedule. The problem is, they have a tendency to underestimate the amount of time it takes to prepare or to travel to a location. For example, they may feel that travel time is just 15 minutes when in fact it’s 30 minutes! If this is the case, then teach your child to be more realistic about their time projections. It would also help to always put a comfortable allowance when setting schedules to account for unexpected turn of events like heavy traffic.

Is Your Child a Conformist?
It sometimes happens that your every lesson on punctuality at home gets negated by a peer group who is always late. Kids don’t want to be the overeager beaver in class – it’s just not cool! If your child is developing a habit towards lateness due to peer pressure, then it’s best to teach him the importance of making decisions based on personal values. Peer pressure may feel very powerful, but it cannot overwhelm a child who values his own mind. Reinforce the positive side of being unique and living according to your principles.

Use Effective Rewards or Punishments
Show your child that YOU value promptness by rewarding prompt behavior or punishing lateness. In the “real world” people can lose their jobs for showing up late. At home, they can lose their privileges. In the real world, prompt behavior is acknowledged in positive work reviews and recommendations. At home, it can earn privileges. Put your money where your mouth is: show your child that you really care about time matters by backing up your words with your actions.

Drives Dangerously

A parent’s worry increases tenfold the moment a child finds his or her way  into the driver’s seat of the family vehicle. The risk of experiencing an accident is a very real one, with consequences ranging from financial annoyances all the way to serious and even fatal injuries. This risk increases significantly when a teen drives dangerously or irresponsibly.

How can parents help ensure that their child drives safely and defensively? Consider the following tips:

Be a Good Role Model
Driving responsibly is not just a matter of skill but also a matter of attitude, so make sure that from an early age, your child sees that you take road safety very seriously. Show that there is nothing that can make you deviate from a safe driving plan — even if you are already late going to a very important event. Your child should never see you engage in risky road behaviors like speeding, racing other cars, rolling through stop signs or running lights. Although your good model of mature and safe driving practices will not guarantee that your kids will do likewise, your poor model of irresponsible driving sends a clear message that road rules are for others to follow and your family is somehow exempt. This gives kids permission to take chances that could lead to disaster.

Driving is Not a Right But a Responsibility
Teens may have the idea that just because they are of age to obtain a license, they are already eligible to drive. However, you can show them that they have to earn your trust first, before they will be given the privilege of driving. For instance, you may want your child to show consistency in arriving home by curfew. You may want to see that he can give you contact information when he is out and about or that he is reliable about calling when he arrives at distant or unknown locations. You may want him to answer his cell phone when you call. These sorts of practices are more important when your child is a driver. Some parents want their driving child to be able to pay for gas, insurance or car usage as well. They want their child to have a job before they get behind the (expensive) wheel. It’s up to you to determine criteria that show trustworthiness and responsibility. However, if your child shows neither, you can expect various car-related challenges to occur on a regular basis.

Educate Your Child About the Dangers of Irresponsible Driving
Perhaps your child underestimates the dangers of driving without a seatbelt, driving while texting, racing on public roads, driving after consuming alcohol or drugs or cutting lanes. After all, if they have so far managed to get away scot-free with these behaviors, they may have an inflated sense of control over the situation. Show them examples of other teenagers who have met the negative consequences of driving irresponsibility. You may even organize a visit to the local traffic control center. Education is always the best way to protect one’s self from avoidable hazards. For instance, did you know that drivers age 15-20 years old accounted for 12% of drivers involved in fatal crashes in 2008? A picture is worth a thousand words; you can do some car crash research on the internet and insist that your child look at it with you.

Get Your Child a Safe Car
If you have worries over your child’s driving behavior, it’s best to ask them to stop driving until the have better skills or attitude. You can request that they take further driving lessons – the kind that addresses advanced skills and defensive driving. If your child gets speeding tickets, make sure that HE pays for them himself. If he gets into accidents, make sure that HE pays for costs involved (or contributes according to his means). When the cost or danger is repeated on several occasions, take away your child’s driving privileges for a period of time. Let him know he can try again in a few months. If, when he has the car again, the driving is equally poor, take away driving privileges for longer – he can try again in 6 months or a year (or when he’s completed his “safe driving” course upgrade). In addition, consider making sure that the vehicle the child drives rates high on safety features. A car that is easy to maneuver, and whose safety features are displayed prominently on the dashboard of the vehicle is recommended.

Effective Family Meetings

Utilizing meetings for planning, negotiating and problem-solving is a well-established corporate practice. These days, however, the practice is also being touted as a critical tool for family life. And because family members are busy people — occupied with work, school, personal, social and communal activities — deliberately setting a time and date to discuss important family matters can be a practical way to ensure that regular communication does take place.

Here are some simple tips on how to run effective family meetings:

Include Everyone
Although everyone doesn’t have to attend the entire family meeting, everyone should have the opportunity to be present at different points. For instance, if dinner meals are being discussed, the whole family should be invited in order to give their input on a matter that will affect each of them. However, when that matter is resolved, some of the younger kids might be excused from the meeting while parents discuss curfew with a couple teenagers. Then, the teenagers may be excused, while husband and wife discuss some issues concerning the family budget. The concept of the meeting is to offer a regular forum in which any issue can be discussed and dealt with. Not all family members have to be present at the entire meeting, but anyone who is directly affected by an issue is invited to be part of that particular discussion.

Discuss Problems, but Share the Good Stuff Too!
Family meetings are excellent venues to discuss issues (“Let’s plan our outing for the long weekend”), air grievances (“I can never find a clean glass in the cupboard”), and resolve difficulties (“He always wakes me up in the night with his crying”). They can also be a forum for progress reports and celebrations (“I just want to bring to everyone’s attention that Jason has been doing a wonderful job of organizing the recycle materials every week”) as well a venue for encouragement and emotional support (“It’s frustrating when you have to spend so much time on homework and there seems to be so little time for relaxation.”) Maintaining a balance of pleasant and difficult topics can help family members look forward to meetings. On the other hand, using the time to discuss only problems and difficult issues usually leads to a reluctance to show up after awhile.

Give Everyone a Chance to Speak
It’s a family meeting, not a state-of-the-nation address, so don’t let one person hog the spotlight. Give each child time to share what he or she feels like sharing by asking each one individually “is there anything that you’d like to talk about today?” Remember: no matter how simple a disclosure may be, the opportunity to communicate openly with loved ones is a priceless thing. Once your child is talking, try to sit back and listen. A helpful rule at family meetings is that a person is allowed to present an issue in a certain time period (i.e. 5 minutes maximum) and during that time period, no one is allowed to talk, interrupt, ask questions or do anything other than sit back and listen. After the person is finished presenting their issue, they can take questions for a few more minutes and then the discussion begins.

Follow Rules of Communication
Follow some simple rules to help keep the meeting productive and emotionally safe. For instance, you might stipulate: no swearing, no bad language, no raised voices, no name-calling (in other words, no hurting people’s feelings); be brief, say the problem only one time; give practical ideas (not ideas that can’t be implemented).

Follow a Process for Problem Resolution
After an issue is raised, ask each member of the family, one at a time, to make a comment or suggestion. The person with the problem can also be invited to make suggestions about how it can be solved. After all suggestions have been brought forward, the person with the problem can ask for time to think about the ideas or can pick the idea that is most pleasing right now. If no one can think of solutions to a problem, you can have a list of helpful resources (family doctor, grandparent, trusted family friend or relative, therapist, spiritual advisor) to whom the problem can be described in order to get further input and ideas as to how it might be solved.

Never Let a Meeting End without Some Form of Resolution
This is the family meeting equivalent of “never let the sun set on an argument.” The last thing that you want is to create tension in the family because a meeting was used for bashing, but not healing. If an issue has been raised but it can’t be completely resolved within the time period of the meeting, then at least outline the next steps that the family will take. You may even set another family meeting to discuss the issue, to give it the proper attention and focus.

Lastly, Don’t Have Too Many Meetings!
Have you ever heard of the term “meeting paralysis”? In companies, this is the situation when nothing gets done because people would rather discuss things than fix them! Family meetings are invaluable, but don’t get stuck with just talking and rehashing issues. Solve problems and support each other. It’s living the closeness that comes after the discussion that makes family meetings so worthwhile.