19 Aug

Easy Ways to Teach Your Child to Budget

10 Smart Websites that Can Save You Money

Even if your student isn’t headed off to college just yet, that first day in the real world always seems to arrive sooner than we expect it to. If you’re looking for a way to prepare your child to handle the realities of budgeting, look no further! I’ve compiled some clear cut, easy ways to help your student get on the budgeting bandwagon.

Budget Basics: The Envelope System

If your student is just starting out on the road to financial responsibility, the envelope system is a great place to start. It’s clear, non-threatening, and simple! Here’s how to get started:

  • First, gather your supplies–all you need is a pen and a few envelopes!
  • Next, sit down with your child and discuss how to divide his or her income, and keep it simple. For example, you might start with:
    • 50% to college savings
    • 10% to cell phone bill
    • 10% to car insurance
    • 30% to spend (clothes, movie tickets, etc.)
  • Write down the names of each category on an envelope.
  • When your child gets his or her allowance (or paycheck), split up the cash into each envelope. The money in the savings envelope can be taken to the bank next time you or your student is nearby.

That’s it! The great thing about using the envelope system is that it forces your student to assign the money as soon as it comes in, which makes free-for-all spending less likely.

The Next Step: Once your child has mastered the concept using real envelopes, have him or her open a checking and a savings account and track those.

Money Management: Using Budgeting Software

As your student takes on more responsibility, he or she may find it difficult to maintain the envelope system with all his or her new categories of spending. In fact, money can become very complicated very quickly when you are paying five or ten monthly bills, splitting rent with roommates, and trying to have enough left over for a new pair of jeans.

This is where budgeting software can come in handy–and with our children so happily ensconced in the digital age, they may be more receptive to budgeting online than on paper.

There are several free or low-cost online budgeting tools your child can use. Like the traditional Quicken software, they draw in information from credit cards, bank accounts, loans, and other sources to help your child compile a big-picture view of their financial ins and outs. Many people have been happy with the free services provided by Mint.com (which also provides great money-saving tips), or you could try a low-cost site like PearBudget.com (only $3/month).

Sites like these often have some sort of “budget wizard” that will help you analyze both your expenses and income and then set a monthly budget for you. PearBudget’s wizard will help you choose spending categories, decide if they are a monthly or irregular expense, and begin figuring a logical monthly budget from there. (They are offering a 1 month free trial right now if you want to try-before-you-buy.)

Your Way or No Way

These are just a couple ideas to get the ball rolling. It really doesn’t matter which method you use, as long as it is you come up with a budgeting idea that works for your student. Remember, our most important job as parents is to prepare our children thrive on their own!

All the best,
Deborah Fox

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