of their expenses such as a financial reward or a day off from chores. Showing them the importance of budgeting for items they need versus spending extravagantly is critical.
“Children must realize that there is an inflow and an outflow of money and you don’t want the outflow to be greater than the inflow or else we become financially over extended,” says Gwendolyn Kirkland, a certified financial planner at Kirkland, Turnbo & Associates, in Chicago. “A budget establishes financial boundaries. So when they’re asking for different things, parents can say they either budgeted or they didn’t budget for it.”
Encourage children under the age of 8 to divide money into different categories. Perhaps they should have one piggy bank for saving and another piggy bank for spending. By the time your child turns 9, talk to him or her about creating a small budget to keep track of income and expenses. Teenagers, should already understand the basics of personal finance and budgeting and be allowed to make their own financial decisions, with your guidance. By then, budgets should be a cornerstone of their money management.
Plant the seeds of entrepreneurship. Not all children receive weekly allowances. When Angelina and Marvin Lipford, of Hampton, Virginia, were married 20 years ago, they entered into their marriage carting around $15,000 to $20,000 worth of credit card and student loan debt. They spent the first five years of their marriage paying off the debt along with the accompanying high interest rates. The couple was determined to keep their three children from falling into the same trap.
Knowing the financial sacrifices they had to make early in their marriage, the Lipfords are making sure their three children keep a tight rein on their finances and avoid the same pitfalls. They have an 18-year-old daughter, Jasmine, who is attending Howard University on a basketball scholarship; a 15-year-old son, Marvin Jr., who is a sophomore in high school; and a 9-year-old, Nehemiah. A natural progression in teaching their children the building blocks of finances was to encourage their children to either work, as Jasmine had done before going to college, or to start their own business. Instead of giving their children allowances, the Lipfords encourage them to earn their own money by doing chores around the house. It was on a pay-per-work arrangement. And if the children asked their parents for additional money, they were required to pay their parents back with interest.
This arrangement encouraged Marvin Jr. to earn money on his own. In 2002, he took the financial and entrepreneurial lessons he learned from attending a weeklong financial camp to cut grass during the summer months using his father’s lawn mower. This past summer, he charged $20 a yard and earned $1,000, which he put into his savings account.
Show children how to pay bills. With so many people paying bills online, this is an opportunity to get children involved. Show them how money is deposited into an account, and how you’re subtracting from those dollars to pay your obligations