Family Budgeting : How to train your child on Smart Money Management

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A budget is telling your money where to go instead of wondering where it went.”-  

 Dave Ramsey

Every financial plan starts with a sound budget which leads to a secure future. If you’re trying to clear your debts or save for a dream vacation, creating a budget should be your criteria to make your financial goals turn into reality. Budgeting allows you to design an effective spending and saving plan for your money.  It ensures that you have enough money for the things you need and other essentials. 

Hence, it is imperative to understand why budgeting is important. Here are some points in favor of budgeting. 

1. Budgeting Helps You Focus on Long Term Goal

2. Budget Ensures You Don’t Overspend

3. Budget Prepares You for Emergencies

4. Budget Highlights Your Bad Spending Habits

An effective budget involves difficult choices and sacrifices. You will have to cut your entertainment spending and do a few other things that seem like they’ll reduce the quality of your life a little. However, knowing that these little sacrifices are in fact adding up to something tangible makes the process much more enduring. When drafting out the budget for your family expenses, take into account the fixed (Typical household fixed expenses are mortgage or rent payments, car payments, real estate taxes , utility bills and insurance premiums) and variable (discretionary and regular variable expenses. Eating at a restaurant, buying clothes, or going out for short weekend gateways are our discretionary expenses. However, some of them represent necessities such as groceries or petrol).

Let your child offer her contribution on your family budget plans including the financial goals, spending limits, saving targets etc.

Teaching your kids about financial skills will not only be helpful in managing your family finance, but help your child to manage or even avoid most of the financial challenges in adulthood. Developing basic financial skills from an early age will help continuing it as a habit and saving for some long term benefits will also become a normal habit.

Here’s how You Can Encourage Your Child into Budgeting

  • Gift your child a Piggy Bank

Giving your child a piggy bank can be great to teach and encourage savings. Explain your child the goal is to fill it with money in terms of coins or notes so that she can save money for future and use it as and when required later.

  • Open a Savings Account for your Child

This can be the best gesture for her. take her to the nearest bank and open an account in her name. This can give a big boost to your child towards saving money and secure her future ultimately. 

  • Lead by Example

 Practice daily savings by creating your own saving jar and deposit   money in it each day. When going out on shopping with your child, show her how to differentiate between different offers and prices. Teach her bargaining skills and explain her why spending on one item is better than purchasing another.

  • Talk Money With Your Child

We need to understand the gravity of such conversations as these can help our children in the long run. It is advisable that when creating a monthly budget let your child sit with you so that she observes and learns the entire process which can make it easy for her and make her feel valued as well to be a part of this important family meeting. Also explain your child the difference between needs and wants and which should be catered first.

  • Positive reinforcement whenever your child saves

It is of utmost importance to reinforce your child by praising and appreciating them when they make small sacrifices and save money for the long run. Your child should be left feeling encouraged when saving even a few rupees at the end of the day.

Teach your child to read the electric bill, ask her to make a plan to reduce monthly consumptions and let her compare the result in the next month.

Teaching your child the tricks and tips of money management can be an uphill task. It is a tendency of every child to spend the little amount of money they receive than saving it for a ‘rainy day’. But being persistent with your teaching and modelling the habits of saving and spending will make it easier in the long run.

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