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Tips to Teach Your Kids About Household Bills and Budgets

Mar14

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This post on teaching children about fiscal responsibility is underwritten by BMO Harris Bank

“I didn’t know people buy houses,” remarked my five-year-old daughter.

“How did you think they get them?” I asked. My family bought a house a few months ago, but my daughter wasn’t there for all the paperwork of the buying process.

“I thought they just build them.” She has seen my husband do quite a few renovation projects that involve building walls, and she’s no stranger to the idea of crafting or making something yourself after seeing it in a store.

“No, we paid money for our house. We also pay money for the things that we use in our house.” This was another opportunity in a long series of talks we have about our family’s finances and how we manage the budget.

I don’t plan to wait until she’s eighteen and ready to move out on her own before I draw back the curtain and show her how we pay the bills and do all of those other grown-up things. I involve her a little at a time so that she will have a firm foundation and confidence to make responsible financial choices.

Here are a few practical ways to teach kids at each age level about taking care of bills and the household budget.

For young children ages 4 to 7

My kids act as my office assistants when it’s time to pay the bills. I let them open the billing envelopes (my kids love mail) and hand me the statements. I can talk to them about how the bills tell me how much things cost, and how I send money for the water and the heat that we use.

One of the goals we have as parents is to teach our kids the difference between wants and needs. Most kids have a great concept of what they want. But needs? Those they tend to take for granted. I teach them how the water comes out of the faucet when they turn it on because we paid for it, that it’s not automatic. Show them clear, concrete examples of how you spend money to purchase things they need.

Let your kids be in on the action of saving money. For those bills that cost less when you use less, demonstrate the value of conserving. Make them run around the house and turn off the light switches in rooms they aren’t using. Let them know that electricity costs money, and if they can use less electricity, then you will have more money to buy ice cream.

For children ages 8 to 12

I volunteered with a program to teach a course about money to kids in local schools. I noticed there that kids don’t know how much things cost, and honestly, I don’t expect them to know how much their parents pay for bills.

What they were aware of, though, was products promoted on television. They knew, for example, that a fast-food meal costs $3.99 because they had all seen the commercials. Don’t let the television be your kids’ primary source of financial information. Teach them that there is more to buying a car than the advertised 0% interest rate, and there is insurance, gas, and maintenance to budget, too. Then they won’t be surprised when they want to buy a car a few years later.

Give your kids a little math practice by having them divide your monthly bills by 30 to find an average daily cost. Smaller numbers can help make household bills easier for kids to understand when you can say, “It costs $2.50 for the water we use each day.” (If that seems like a small amount to them, have them multiply by 365 to see how it adds up.)

Start a savings account for your child so they get firsthand experience in setting money aside for the things they’ll need and want later.

For teenagers ages 13 to 18

Teens need practice to manage money. When I was a teenager my parents gave me a set amount of money each month to buy clothes, and I had to budget it. It gave me good experience in thinking about my expenditures ahead of time and trying to figure out how I could save money one month to have more the next month.

My parents also gave me a budgeted amount of money to spend on school lunches. If I wanted to spend more, I had to supplement it with my own money, which helped me be careful about discretionary spending and what I could afford.

You could even go a step further and let your teen practice modeling a household budget. Start with a realistic salary figure and have them brainstorm what they’ll need to pay for when they’re in their own apartment. They’ll quickly realize how much of the budget goes first to the things they’ll need compared to what they want.

How do you help your kids to better understand bills and budgeting?



Photo credit: Thinkstock

About the author


http://smallnotebook.org
Rachel Meeks is the voice behind the popular blog Small Notebook, a resource for simplifying and organizing your home. (Because it's so much easier to be a parent when you're not surrounded by a ton of stuff.)


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7 Responses to “Tips to Teach Your Kids About Household Bills and Budgets”

  1. My parents did lots of these steps with us growing up. While I don’t claim to be a financial know-it-all, I do now that I made much wiser choices as a college student and young adult than a lot of my friends did! :)

  2. Andrea Mar 15 at 1:01 am Reply Reply

    Our 4.5 year old often hears me tell her that she’s welcome to purchase something in the store if she has the money to do so. A few weeks back she was determined to have s’mores. As we were leaving the house for the grocery store she made sure to get her money and her shopping bag. She put the ingredients in her cart and used her money to pay for the items she wanted. She was so proud… and so was I.

  3. annie p Mar 15 at 9:30 am Reply Reply

    you are right – it’s good to start planting the ideas now. there’s a show on pbs called Biz Kids that teaches money concepts to kids in a fun way. my daughter got into it at age 6, and i would watch it with her to explain because it was over her head.

  4. AmyRenee Mar 15 at 1:15 pm Reply Reply

    my parents put an extra twist on the school lunch example you gave:
    School lunch cost around $2 / day. My parents gave my sister & I about $15 every week that we could either use for school lunch + fun money, OR if we wanted to pack our own lunches they would buy the groceries, but we were responsible for making sure the things we wanted were on the grocery list and we had to pack them ourselves. It was an excellent lesson in planning & responsibility.

  5. Rachel Mar 15 at 1:33 pm Reply Reply

    My parents also used a multi-bank system for our allowance. We received a dollar for every year of our age, however we had to split that money up four ways. 15% was for charity, 25% was our “quick cash” that we could spend as we pleased, the remaining 60% was split equally between short term and long term savings. Short term was allowed to be used for special things we were saving up for (large purchases, special gifts, vacation spending etc). Long term was for college.

    The most effective part of that for me was remembering to budget for charity. To this day I make sure that a percentage of my monthly income goes to help others.

  6. fancybob Mar 15 at 2:15 pm Reply Reply

    I have to say that I love this topic. My husband and I are a case study in 2 very different ways of raising kids with financial knowledge. My parents for the most part worked with me to save my allowance/gift money/pay to buy the things I wanted plus encouraged me to save any large gifts & earnings for the future. Additionally, they helped me get a credit card for college (no cosigning, even) and sat down with me to look over what I’d spent money on and taught me the importance of paying my bills in full each month. All in all, they were very up front with me about the money that I had to my name and gave me the tools to save and spend appropriately. I came out of college with no loans (I was lucky that my parents paid for my college) and significant savings, plus a good basis for how to not get myself into debt in the future (which is currently being challenged after buying a house, having a husband in law school, and getting pregnant with one income).

    On the other hand, my husband, whose father is a banker no less, received very little guidance from his parents on financial matters. Coming out of college, he drained his savings very quickly and had no credit to be able to even get a credit card for years. He is still very nervous about using a credit card, even the proper way (paying off the bill in full each month), thinking that it will put him in debt.

    One tip that my mother did, which helped me tremendously in my credit rating as an adult, was to take out student loans in my name even though she was paying for my college. That way, as she paid them off, I got the credit score benefit!

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  1. Parenting Thoughts, 10 Playtime Ideas, and Family Finances | Small Notebook - Mar 14

    [...] Tips To Teach Your Kids About Household Bills And Budgets – I won’t wait until my kids turn eighteen before I teach them about paying the bills and those other grown-up responsibilities. I’m brainstorming ways to involve our kids in our family’s finances. Join me there? [...]

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