All too often today, children are clueless when it comes to finances and budgeting – but I want my children prepared. My husband and I have set down guidelines to help teach lessons about money and spending. We also use everyday situations as real life examples. For instance, when we go shopping we discuss the pros and cons of purchases and talk about how debt accumulates. I don’t want my children to fall into the trap of overextending themselves on credit cards.

Here are a few tips we’ve taught our children, and some methods we use to show the importance of handling money properly.

Write a Budget

Each child is taught how to write a budget for the home. We sit down and figure out the monthly salary a person would bring home if they made $8 an hour (or any appropriate amount). Then we document the necessities: electricity, insurance, rent or mortgage payment, water, food, gas, etc. Each child has been amazed when they realize how much is necessary simply to run a home. I also put them in charge of groceries for the week. The child has to plan meals, write the grocery list, and go shopping – all the while staying within the budget.

Staying on Top of Credit Cards

We teach our children that if they decide to have a credit card, they need to pay it off at the end of the month. Don’t make a purchase you can not afford to pay off immediately. We have them work out examples of how much they would actually pay for an item if they continue to pay interest. Then we figure out how long they would have to save up to be able to purchase the item they are looking at. They usually decide just to wait.

Keep Track

Each child is required to keep a notebook of their spending. Yes, every single penny, because even the small purchases add up. My sons have started saving all their change in a jar, and have been amazed at how much they have accumulated by the end of the month.

Open an Account

Each child has a savings account and is required to make deposit each month. They do not touch their savings, unless they have found something special and we discuss the purchase together. This has happened occasionally for a large purchase, or around family birthdays, when they want to purchase an item on their own. When we set up their accounts, even though they start out as a savings account, we teach them how to fill out a check and to keep a balanced bank book.

Give to Others

We think it is important to teach our children to give, and not just at church. We have a small glass box that we each slip something into as we can. After the box is full, we choose where to disperse the funds. Sometimes it is a family in need, other times it is a ministry we try to support. Each one of the kids is learning the importance of giving to others, and sometimes having to do without a special toy or game to help someone else.

By following these steps, I hope we are teaching our children how to handle their finances. They will have the ability to write a budget and stick with it. And they will hopefully have learned that it is better to save for an item than to buy it on time or with credit. Mostly, I want them to be able to make well informed decisions. I wish I had been taught all of this, as we had to learn from our own mistakes.