If a 7-year-old has a great child’s budget, will that make him a frugal adult? It may, and it may not. But, we do have lots of evidence to suggest that spoiled children often become over spending and greedy adults. What happens at 7 could easily happen at 70, since good and bad habits grow over time, so why not start growing good habits with a child’s budget early.
Psychologist say the earlier you teach someone a skill the better chance they will perfect it overtime. That is seen in teaching skills such as music, sports and education. In my humble opinion, that also works with budgeting skills.
Some folks can’t figure out why their kids constantly beg for everything in sight, then they look back at the fact that they did not set proper limits on spending early. They felt that a happy child was a child that had everything they wanted, until of course, the child hit their teens and then twenties, and their begging for “things” and spending money developed into out of control behavior.
Here are 3 things you can do to put your 7-year-old on the right path for life.
- Give him an allowance, a piggy bank and chores to begin his child’s budget
Some parents think children should not be paid for the chores they do around the house. I am of the camp that feels there is nothing wrong with giving a child an allowance for working around the house if it is in line with age and chores.
The child does their chores on a schedule, they are paid on a schedule and they are encouraged to save a portion of their allowance and budget the remainder. It teaches them early that we all must work for money, and money has a limit.
- Discuss value, which is the pinnacle of a child’s budget
Some products appear cheap, but they will not last after the first usage or wash. So, teach them there is a difference between expensive, cheap and value for a product. You can purchase a product that appears cheap, but has very low value because it is made with low quality materials or craftsmanship, and quickly falls apart and becomes useless.
An example is buying a computer that is very inexpensive but it only last for 3 years, versus paying slightly more, say 30% more for a computer that last for 12 years — the savings is obvious. On the other hand, you can purchase an extremely expensive car, the upkeep is extremely expensive, and the breakdowns are frequent. That car may look good and go fast, but has little value for practical use and longevity. The maintenance cost out way the looks and performance.
- Teach your child about budgeting, savings and costs to round out your child’s budget
The earlier a child understands what a budget is, how to budget out the total sum of the money they receive, and how cost effects their savings, the better they will be in the future.
Sit down and decide with your child what is important for them, you can look at the internet or newspapers and find the prices of items they are interested in. Inform them that prices change from time to time, but this will give them an idea of what they must save. Allow them to set short term savings goals – a sports item like a basketball or doll, and a long-term savings goal like a more expensive game.
When you buy their more expensive items like bicycles, ATF’s, computers, and clothes, use this time to also discuss value, longevity, and cost.
Using steps 1,2, and 3 will allow your child to start early to process a functional child’s budget, so they can take budgeting into their adult life as an expert.