Once your child starts managing his own money – whether he gets an allowance or income from a part-time job – it’s a good idea to create a budget together so that he can begin learning how to be a smart money-manager.
1. Identify income and deduct expenses
To create the budget, start with your child’s income. This may include money from part time jobs, allowances, or gifts. Then deduct his expenses. These probably won’t be too numerous at this stage – maybe lunch, or a cell phone plan if they have one. Beyond that, it comes down to entertainment expenses – such as movies, clothing and eating out with friends. It may take some trial and error – not to mention some negotiation – to get to a number that works for the budget and for your family.
2. Allocate to Savings
Then, try to allocate some money to savings so that your child can start to learn the value of setting money aside regularly, rather than spending everything he earns. To start, you can identify a goal – something your child really wants - that will require “saving up” in order to buy it. This is a great way to teach the value of saving to get something that’s truly important to your child.
3. Consider Donations
Some families also add a line in their child’s budget for donations. Together, you can come up with a number or a percentage that you’re both comfortable with.
Once you’ve set the budget together, many parents recommend letting your child manage their money fairly independently, at least to start. Kids may make mistakes – such as blowing their money on something less meaningful instead of contributing to their savings goal – but these are lessons they learn as they go.
If you need some help getting started, there are some simple online budgeting and saving tools that you can use to get your child’s money management skills off to a strong start.