It's important to teach children budgeting concepts to establish good habits that will help them grow up to be financially responsible adults. Budgeting techniques for children don't necessarily require kids to earn and spend money. The age at which to begin teaching this to children varies, but if the child is old enough to earn an allowance, or have an after school job, he should learn about budgeting.
Tracking costs is one of the fundamental techniques children can learn when it comes to budgeting. While a $2 toy might not seem expensive today, the $100 annual bill for buying a new $2 toy every week might represent a fortune to a child. Teaching a child to track costs in a notebook makes it possible for the child to understand how costs add up, and how to look at the big picture when creating or adhering to a budget.
Setting Savings Goals
Once children understand how to track their spending, they can learn to focus on saving. Setting savings goals is a budgetary technique that's common to businesses, families and individuals. Parents and teachers can ask children to think about long-term goals, such as expensive purchases or contributions to fundraisers, projects and participation in clubs. Dividing this amount by the time remaining to save the money will show a child how much to set aside from each weekly allowance.
Budgeting for Events
Event budgeting is another technique that children can use to actually manage limited resources. Parents can set budget limits for events such as birthday parties, movies, or theme parks, allowing children to choose how to spend that money. This requires a child to estimate costs and determine spending priorities. It can also include a lesson on the technique of making budget cuts to stay on target in the face of unexpectedly high costs along the way.
Projecting budgets into the future is a technique that children can practice using their own spending records and savings goals. Children can review their savings balances and spending records at the end of the year, and then use this information to plan a budget for the following year. Expenses may be higher, especially if the child plans to enroll in more programs or buy more items.
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