Teaching kids to maintain a budget

While I do not have children yet, I definitely think it's a great idea to teach young children how to budget and live successfully and happily on a budget. When I was growing up, my parents taught me the value of a dollar and I'm so grateful to them for it. I see some of my friends today and they have such a hard time managing their finances and sometimes cannot seem to get their heads above water because they do not realize that money earned doesn't have to automatically mean money spent.

While there is no 'one plan' to teach children how to budget, I think it's important for children to learn about comparative shopping (like buying store brand as opposed to brand name) and responsibilities (like house chores and weekly/monthly allowances). I also enjoyed cutting coupons with my mother on Sunday mornings when the paper came in. We bonded and I learned that money saved is money earned. And all those dollars we used to save allowed me to splurge on one thing I really wanted every other month.

I think it's unfortunate that schools aren't teaching financial responsibility while children are subjected to intense marketing campaigns and peer pressure to keep pace with trends and friends.   I think schools can only go so far as a child's financial reality and perceptions are influenced by their immediate and extended family and local community.  By nature, we tend to be very generous with our children which can set the expectation bar pretty high.   I think there are two key lessons to learn: 1) budget management / tracking and 2) budget estimation -- forcasting spending versus income.   There's also a longer term message around future planning; ie not spending 100% of income.

I'm not sure how much children can learn outside of actual experience so I've tried to come up with focused experiences that convey aspects of financial responsibility.   My teenage daughter is on a twice yearly clothing / entertainment budget that we negotiate and she has responsibility for managing.  When she's out of budget there are no new cloths or itunes until the next budget cycle.    We discuss how many hours she's have to work at one of the job's her older friends have to earn that money.

 I also try to help her manage impulse buying when she's shopping by playing "gong show".  We make a list of the things she "needs" and agree on it.    She can still shop for other things but could get "gonged" and lose everything.   This forces her to prioritize whim items and consider whether the next one is worth losing everything -- she's not sure whether I'm tracking number or cost of items so the cheapest most important thing is best bet.