Creating a family budget can be a great way to get your finances in order and teach your children to be responsible about money.
Depending on their ages, they can participate to a greater or lesser degree in the process, but there should be a sense that everyone has a say. A family budget also destigmatizes talking about money, which can be a difficult subject for many people. Keep in mind that these conversations should be fun and not stress filled. The idea is to give your children a positive, educational experience.
Be up front about the family finances
Children shouldn’t be worried that they might not have a roof over their head or food to eat, but it’s good for them to have a basic sense of what is coming into the household and how that needs to balance what can go out. The level of detail you share might vary depending on the child’s age and maturity level. Even young children can start getting a small allowance, and you can talk to them about what they might like to save up for and how long it will take. Younger children might do better with concrete visual aids. A clear jar that they can put money in and see it stacking up can be motivating. If you really want to encourage saving, matching their contributions can be a great way to do so. For older kids, there are a range of checking account choices for teens to deposit money into.
Think about college
One thing to consider is how you’ll pay for the kids’ college—or how they’ll pay. If they are young, you might want to think about setting up a savings account specifically for that purpose. Many parents prefer a 529 plan, which offers tax benefits if used for educational expenses. However, others prefer to go a different route or even use a portion of retirement savings. There are pros and cons to each option, so it’s best to do some research and even talk to a financial professional to decide which is best for your family. With older children, you might talk to them about how they will pay. This could be a combination of savings, scholarships and student loans. Even if your kids aren’t ready yet to apply for student loans, you could look at some sites that offer loans and talk about interest rates and what makes for a desirable repayment plan.
Make plans for discretionary spending
The whole family can participate in deciding at least where some of the discretionary budget goes. For example, what streaming service will you choose if you can only have one? Will the weekly family night takeout budget go to pizza, burgers, Chinese food or something else? You can also take children grocery shopping with you and talk about the difference in prices of things. Does that price difference always mean a difference in quality? Let your kids participate in deciding where to go on vacation. The more you are able to give them age-appropriate discretion over certain aspects of family spending, the more ownership they will feel in sticking to the budget they’ve helped create.