Why talk about budgeting?
Talking to your child about budgeting might seem a bit daunting. Surely childhood should be carefree and finances should be left to the adults, right?
I don’t know about you, but I’ve lost track of the number of people that have told me they wish they’d been taught about money when they were younger (and lessons were less costly).
The pandemic has spurred conversations with kids about money
In fact, T. Rowe Price’s 13th annual Parents, Kids & Money Survey, which sampled over 2,000 parents and their 8- to 14-year-olds, reveals insights into the pandemic’s impact on families and the findings suggest that parents feel an increased urgency in the need to have money conversations with kids.
While it’s unfortunate that the pandemic has affected the financial well-being of so many families, the good news is that parents are having more conversations with their kids about money.
Research shows that kids, who have had frequent money conversations with their parents, are better positioned for financial responsibility in adulthood. Kids often pick-up on the unspoken cues and stressful situations can be powerful teaching tools. Cents for Kids wants to support parents with the tools and resources they need to take advantage of everyday teachable moments.
Managing money is a life skill
Your ability to manage money effectively impacts just about every aspect of our lives. Think of everything we do, day-in and day-out—where we live, what we eat, the clothes we wear, the cars we drive, health care, education, kids, holidays, gift giving—you name it, money is involved. Learning to think critically about the decisions we make with our money takes a lot practice and delaying these lessons just steepens the curve.
Budgeting helps children grasp the fact that money is a finite resource and we need to make choices about what to spend and when to save. A simple budget can help illustrate that they can’t have everything at once, but they can make a plan for how to earn and save for the things they want.
The road to financial independence is paved with bad decisions and their consequences
To be clear, we’re not suggesting that you force your child to stick regimentally to a plan. In fact, it’s the choices they make and the consequences they face (good and bad) that create the learnings and enhance their financial decision-making abilities.
By the way, when your child makes a money mistake, DON’T BAIL THEM OUT—buyers remorse is best learned through experience. Pocket money is a tool to support meaningful conversations and lessons about money, not a substitute.
Learning to spend within your means and plan ahead is foundational to successful money management. After all, financial independence doesn’t come from how much you make, it comes from what you do with that money.