Budgeting and financial discussions may not be the most exciting topic for young adults, but studies show the earlier you introduce financial literacy to your children, the more likely they are to have long-term financial success. Here are a few topics to discuss with your children about having a disciplined approach to earning, spending and saving to foster great money management habits.
You must make money, to spend money
Teaching children the importance of working hard to earn an income is an important lesson. Not only will they have more to spend but they’re more likely to feel the value of that money when they go to spend it. Whether it starts with additional jobs or chores around the house or a part-time job during high school, there are many ways to help your child earn money.
Budgeting and planning is key
Engage your children in discussions around the family budget and help them create their own spending and savings plan. As your children get older, help them set short and long-term savings goals to practice their skills before heading off to college.
It’s important to consider big purchases and how they can impact your budget. One lesson is to have your children practice researching different electronic devices, so they can understand the principles of comparing cost and value differences between products. During this time, it’s also important to stress expenses that are needs versus wants and which items to prioritize in a budget.
As students prepare to head off to college, it’s important to consider new expenses such as the basics (food, clothes, etc.) they may not be used to paying for and larger expenses such as technology upgrades (the latest smartphone for instance).
Track your spending for better spending
Whether making purchases by swiping a card, tapping a cell phone or using a new app, technology has made it easier than ever to facilitate everyday purchases. But it has also made it easier than ever to overspend!
To help rein in incidental expenses, students should monitor their spending. Setting alerts on their phones for a low balance, purchases, etc. is one way to remind students to take a closer look at their banking statements to track purchases over time. Monitoring their checking and savings accounts through their bank or credit union’s mobile app is another great habit to get into.
In reviewing their expenses, they may find some patterns of habitual, unnecessary expenses that could easily be overlooked in the rush of life. The daily $5 purchase of that extra-large latte may be replaced with a $2 cup of coffee — saving $15+ dollars per week and over $750 per year, those little purchases add up fast!
Budgeting can be as simple as allocating resources to save for a future purchase such as a new TV, or as complicated as balancing current spending to pay down student loans and save for a home or retirement. Parents can empower students from elementary school through college with common sense approaches to budgeting, rooted in basic choices of saving, spending and giving. By understanding how to budget, they can take control of their personal finances and successfully achieve their financial goals.