Getting your Kids Involved in Developing a Budget

Family

I remember when I went off to college I was shocked and overwhelmed when I learned about all the different expenses involved in just living. Don’t do this to your kids. Start teaching them early on about all the things that cost money and how important it is to track and monitor where their money goes. A great way to do this is to have them actively engaged in the family budget or doing their own personal budget. Once you have established goals you can help your child develop a budget to achieve these goals.

The best way for your kids to learn by is by doing. There numerous ways you can expose your kids to developing and maintaining a budget. Browse through the following activities and select one or more that will best help you teach your kids about budgeting.

Index:

First Activity - How Expensive am I?

This exercise is helpful to teaching your kids or tweens about all the expenses associated with taking care of them and the family (to include the dog Rover).

Step 1 – Ask your child to list on a piece of paper all expenses that he thinks is involved in taking care of him and the family

Step 2 – How close did they get? This provides a good opportunity for you to talk with them about the different expenses that make up a family budget.

Step 3 – Then have your child identify which expenses they think would be the easiest to reduce and why? This provides an opportunity to discuss the concept of a budget and where the family could reduce expenses to help achieve a family goal or withstand a financial hardship.

Second Activity – Budgeting for Your Vacation

The family vacation can be a good opportunity to introduce your kids to budgeting. This activity can be tailored to kids of any age.  Before the trip give the kids the total amount you have allocated for the trip. Ask they to determine the costs associated with various expenses like transportation, lodging and food. Then, ask the children to determine the impact of these expenses on the budget. Discuss how any remaining funds could be used. For older kids, get them involved in planning the trip and making comparisons on different options related to the trip such as airfare, driving, lodging, entertainment, etc.
While on the trip, create a daily budget and do a daily budget summary using play money each evening. Ask the children questions such as: How much was spent and on what that day? Was the spending within budget? What can the family afford to do the following day? Involve the kids in deciding how the family budget for each day will be used. To experience real life budgeting, give each child souvenir or real money to budget and spend themselves during the trip.

Third Activity - Family Budget Role Play

Kids should complete the following activity to expose them to principles of developing a budget. Give the following scenario to your kids.

You are the head of the household. You are responsible for creating a monthly budget for your family for the month of April, 2009. Your budget must be realistic and you must live within your means. Before you begin you must first develop a family scenario. It can be based on your family or completely made up. The scenario should consider where they live, who is in the family (a two-parent family or a single parent, how many kids live at home, etc.). Next create a spreadsheet that reflects your family’s monthly income and expenditures with the following information:

  • Determine your occupation and salary: Find and print the annual income for this occupation in the city where you live, then divide that amount by 12, the number of months in a year, to determine your monthly income.
  • Determine your spouse’s occupation and salary, if applicable: Find and print the annual income for this occupation in the city where you live, then divide that amount by 12 to determine your monthly income). Also identify potential other sources of income. For example, if you are divorced and have custody of the children list your monthly child support in the spreadsheet.
  • You live in a four bedroom apartment with your family. Find and print the cost of the apartment per month.
  • If your apartment doesn’t include garbage pickup, water, parking fees, gas, heating, and lights, determine your monthly costs for these expenses. (Print the documentation that supports your figures.)
  • You will need renter’s insurance for the contents of your apartment. Find and print this monthly expense.
  • Determine your monthly telephone expenses. Does this include cell and land line phone? (Print any information that supports your findings.)
  • Determine your monthly cable expenses. (Print any information that supports your findings.)
  • Determine your automobile expenses. Expenses must include the following: monthly payment including interest, insurance, routine maintenance and oil changes, car washes, and gas.
    (Print all information that supports your findings.)
  • Calculate your monthly entertainment expenses. Find and print at least two family entertainment venues in your city (ie. movies, games, theme park, etc.). Calculate the monthly cost for your family to attend those events.
  • Clothing expenses: Determine the monthly clothing expense for your family. Break down the items you will purchase for each family member.
  • Food expenses: Determine the monthly food expenses for your family.
  • Childcare expenses: Find and print the monthly childcare expenses for your family. Even if your children are school aged, you must budget for after school care.
  • Household items – i.e. Toilet paper, shampoo, deodorant, cleaner, newspaper, etc. Determine your monthly expenses for household items.
  • Personal Care: haircuts, manicure, etc. Break down these expenses and calculate your family’s total monthly expenses.
  • Birthdays: You must give your children Birthday Day gifts. If any of your friends/relatives have a April birthday, you must also purchase a gift for them. Find and print the gifts you will be giving and calculate your monthly expense.
  • Other: What additional costs should you consider? Do you have a pet? Is anyone in a club or activity that requires dues?
  • Savings: The remainder of your income after all expenses are paid will go into a savings account. Indicate the amount you will put in your savings account, monthly.

After you have gathered all of the above information, create a spreadsheet showing your budget. Your spreadsheet should contain formulas so you can plug in different numbers each month and your spreadsheet will accurately calculate the current month’s expenses.

Graph your spreadsheet using a graph style that you feel best illustrates the breakdown of your monthly expenses. Discuss with your parents your findings. What did you learn from this exercise? Were you surprised at what you found out about expenses?

Adapted from "Family Budget Computer Lesson Plan"

Fourth Activity - Steps to Teach Your Teen to Budget

It's important to help your son or daughter create their own personal Spending & Savings plan. What's a Spending & Savings Plan? Basically, it's a budget ... but a "spending plan" sounds better to teens. Remember, most teens prefer spending, not budgeting or saving.

Help your teen look at the big picture before they get a surprise in the form of credit card bills, bounced checks, or automated teller machines that refuse to surrender cash. But remember, a Spending & Savings plan isn't carved in stone–it should be adjusted as the situation dictates. In fact, the budget should be completely made over at certain times, such as when their income increases, or if they get a bigger allowance, or start working part-time. Having more money means more money for which to spend and plan.

Teenager budgets shouldn't be complicated. Simply follow these steps.

Step 1 - List total net income, including money previously set aside, their allowance, cash gifts, or wages from a part-time job.  Don’t forget to educate them on net income which is the amount of money they actually receive in their paycheck after taxes and any other deductions (such as Social Security, health care, Medicare, etc.) are subtracted. 

Step 2 – Next work together to itemize your student's regular monthly expenses. Recommend that they keep a spending diary and keep all their receipts over a month to identify where their money goes. Make sure that they also consider expenses that may only occur periodically such as cub scout dues, sport activity fees, etc. These should also be factored in.

Step 3 - Subtract expenses from income to see if the budget is reasonable.

Step 4 - If the expenses outweigh the income, work together to trim expenses until the numbers agree. Have them brainstorm ways they can earn more income and/or cut some of their expenses. Your teen's budget should also include a savings strategy. Help your kids identify financial goals to help to motivate them to save. Then encourage your kids to make regular deposits into a savings account for these future expenditures (such as a car, an apartment, or student loans).

Don't let your children get into the bad habit of putting into savings only what's left over at the end of the budget period. With most teenagers, there's typically nothing left over!

Step 5 - Sit down together periodically to review the budget you've developed. Be sure your kids understand the importance of maintaining this budget to avoid overspending and debt trouble. But also remind them that it isn't carved in stone. If their favorite band is coming to town and they want to splurge on a concert ticket, they can simply cut back on other expenses for a month.

Adapted from College Parents of America.

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