I am not a financial expert, I assure you. We have made our mistakes financially, but we are trying our best to teach our children sound fiscal wisdom to hopefully change their financial trajectory. Greg and I set a budget each month, but we wonder when to teach this to our children?
From an educational perspective, there's really no bad time to start! You just have to be sure the lesson is age appropriate. For instance, younger children may only have three things to allocate money to in a budget: giving, saving, and spending on fun stuff. Older children may have more: giving, saving, auto insurance, gas, clothing above and beyond the family budget, entertainment, etc.
Just because we can, though, doesn't mean we should. Let me explain. We want our kids to have a life full of all things happy and fun. But we are also teachers of life. There are times to allow the happy and fun and times to teach the life lesson called "How Much Things Really Cost." For example, even though we can afford to give our kids money to go to theme parks or the movies at the last minute, we choose to teach them that as the heads of the household, Greg and I budget for the family. Since this is last minute, they need to use their spend money thus they need an age-appropriate budget in place. We did this a while back with our oldest daughter (now 21). She wanted to go to the movies last minute with some friends which of course we encouraged. Without prompting, she said, "I have money for the ticket and concessions." When she got home she said, "Do you know how much movie food is? We shared a popcorn and got water from the fountain." As children age, it's okay for them to realize how much things cost. They don't need to be stressed out about how much it costs to maintain a household, that's not the point. But as we guide them towards independence, knowing that utility bills, insurance, gas, etc. will need to be paid for with income helps them plan for a career. Of course money isn't everything, but it is a necessary part of adulthood.
Two things have to happen prior to this lesson:
1) We have to set our children's commissions age-appropriately. There is no need to give a younger child a lot for commission if they are simply saving the spend money for a toy. As they age, though, they will need a greater commission so that you can teach these lessons. Commissions should be household- and age-appropriate.
2) We have to communicate this to our children ahead of time. It's okay to talk to them about family budgets (not necessarily how much but rather that you should have one to function responsibly). It's okay to let them know that there are some things they will need to afford on their own so that when they are in college and beyond, they will understand the value of a dollar and the value of a budget.
Very interesting things happen when your children begin to understand the value of the dollar. They might decide the purchase isn't worth it. They might opt for delayed gratification or allocate their money in a way that spills over into things like time management. They often learn to live within or below their means. These are wonderful lessons to learn now while we are there to give them a kiss and a hug and support.
If you have older children, check out some app or online budgeting tools. This is a great way to slowly introduce your older child to budgeting and ease them into the many things they will be financially responsible or when they are on their own.
We also have personalized transaction registers. I know they're now archaic :) but they are helpful when you are teaching how to budget. These registers are divided into give, save, and spend, and you can customize with your child's name, font, font color, and design.
What are your thoughts on this subject? I'd love to hear your thoughts and ideas!