How to make children understand the budgeting

The most challenging task is the budgeting for young adults. As they find it tough to manage their money and segregate the department where the money is to be spent on so that there is no waste of money as well as money is put to good and wise use. Nowadays, parents start early and teach their kids how to budget their week and surely you don’t need any degree in finance to do so.

Parents give a monthly allowance to their children aged between 5-12 years old, which is to be spent wisely on their daily chores, for enjoyment and to fulfill their everyday need. And then if they are left with anything then they can spend that amount on:

  1. Luxury or
  2. Save it for the next month or
  3. Deposit the amount in the bank as the minor savings account

For children aged between 13-17years old can work outside for some hours and that will in itself be their pocket money so If they want more money to fulfill their need or desire then they have to save. Give your children the basic need stuff and let them buy luxury for their own themselves. Allow them to do some bank work like deposit the savings in fixed deposit or mutual funds, which will indirectly help them to understand the value for money and how can they be saved and gained interest on them.

It’s important to keep children abreast with financial knowledge since it will help them to face financial challenges. In the era of invisible money, it’s quintessential to make kids understand the value of the invisible money and how to save it for future needs. Children using credit cards, debit cards did not even realize how much are they spending and whether its worth spending or not. If parents don’t explain them the gravity of savings, then kids will not turn their heads around, they will keep on spending and be a spendthrift.

Children should also be taught that whatever they are earning is directly proportional to what they are contributing. For instance, if your kid asks for a toy, then don’t just fetch that toy and give it over to him. Tell him to buy it with your hard-earned money and if you don’t have this much amount then save it this month and buy that toy next month, this will help the kid to understand how to use money efficiently and effectively. There is one more essential thing which a kid must learn is the habit of sharing. Imbibe within him/her the habit of contributing some percentage to charity, give away the cause, charity, animal shelter, old age home etc.

Assist your kids to understand the value of opportunity cost. Let’s suppose, your child wants a toy and the very next day he comes up with another demand of a pair of shoes so in that case make him understand that your saving can afford only one thing, now it’s your choice which is your priority and which one do you want to buy first. This will also enable him to make the strong decision. He will be able to decide wisely and will improve his decision power

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