Empower Your Kids With Spending AccountsWeek of February 14, 2019
Empower Your Kids With Spending Accounts
Few kids know how to live within a budget or even understand the concept of trade offs. It can be too easy to shield your child from the tough decisions that are made on her behalf. Can your child fit all of her back-to-school clothing choices into a fixed budget? Does she realize the cumulative expense of the daily Starbucks Frappuccino?
Unfortunately, not being involved in critical spending decisions can leave your child without important money management skills and instincts. There's nothing like learning by doing and it is never too early to start. By gradually transferring responsibility for specific spending categories to your kids, you can:
Develop mindful spending.
On a budget, your child will have to assess what she wants versus what she needs and figure out what's worth buying. Planning becomes more important than impulse buying.
Encourage habitual saving.
Her weekly or monthly budget won't always be enough. She'll start to learn to save it for what she wants and not spend it all right away.
Cultivate understanding of spending limits.
If she spends her entire budget before the next refill, she can safely learn the consequences of poor planning.
Grow her confidence.
Help her not only feel comfortable working with money, but also empowered for being trusted to make her own decisions.
Did you know...
71% of parents worry that cost of living is so high that kids 'can't afford to make mistakes.' That's why we need to create a safe space for them to mistakes earlier in life.CIBC
Make the most of spending accounts
It is unlikely that your child is ready to take control of all the spending made on her behalf. Gradually introducing visibility to and then responsibility for how money is spent gives her a stake in the game. We suggest:
Start slow with small weekly budgets
Get her used to purchasing items she needs to buy regularly like food, transportation or app-store purchases.
Build towards monthly budgets
Items like clothes, shoes, toys and beauty products are suitable to get her to start thinking about spending wisely, making her money last, and saving across income-cycles.
Challenge with long-term budgets
Start giving her money quarterly or even annually - ideally for items like clothes, sports equipment or gifts -because those expenses fall irregularly and in highly varied amounts. This will teach her to plan for big expenditures, prepare for the unexpected and be disciplined over extended periods of time.
Match unspent money
Markdownut it into a savings account. This reinforces savings instincts and develops an intuition for compound interest. It's easiest to do this with long term budgets so money changes hands only a few times a year.
Develop a plan for the unexpected
How are you going to handle it when your child needs or wants something not covered by the budget? Are you going to hold the line, up the budget, or develop an alternative approach like lending her the money? Being prepared prevents arguments or inconsistent approaches.
Does this all sound like a lot to manage?
Don't stress! This is why we are building Till!
Prepare kids financially with practice money
"It's important for parents to give kids age-appropriate financial experiences when they're monitoring them," University of Arizona doctoral student, Ashley LeBaron, said about her findings. "Let them make mistakes so you can help them learn from them, and help them develop habits before they're on their own, when the consequences are a lot bigger and they're dealing with larger amounts of money."
Does your kid even know what a dollar looks like?
Cash is under pressure as more purchases go digital, to the card, or on-line. Will children forget what a dollar looks like? Will the dollar go the way of the vinyl record or rotary dial phone?
Financial educator of the year.
Congratulations to Maria Riofrio for being awarded by the National Financial Educators Council’s instructor of the year. Riofio’s outreach to underserved communities is inspiring.