Back-to-Budget Basics

    Teaching Children about Money Management

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    Do you think money grows on trees? How many times did you hear that one  as a child? During my teen years, when fashion trends were dictated by Izod and Calvin Klein, my parents must have thought I really did believe in those money trees. Now, as a parent, I realize the need to help my 13-year-old daughter and other youngsters connect the dots between budgeting and spending.

    A good place to start is with simple exercises in basic money management.

    When it comes to outfitting your kids for school, it’s smart to be proactive and determine in advance the amount that you are willing to spend. Hold money separately for necessities like undergarments and shoes, and the remainder becomes your children’s clothing budget. Explain that a certain amount is available to each for school clothes this fall, and let them know that they will be allowed to make their own shopping decisions based on their own budget. Your role is to make sure that the outfits comply with school policy and your family’s preferences.

    In my house, we buy two times a year because of growth spurts and seasons: once before school starts, and then again mid-year. Before we go shopping, I remind my daughter that her selections will have to work all season. Translation: What she buys is what she gets. We talk about her needs before we leave home, because serious talk at the mall is like talking to a wall. There are too many distractions!

    The hardest part of the exercise comes later, when you allow your children to perhaps suffer the consequences of their choices. You may hear complaints like, “I need more jeans. I only have two pairs!” If you know there are only two because too much was spent on each pair, your response might be, “So what I am hearing is that two pairs of jeans are not enough? So why did you buy only two?” Ask the hard questions, and then be quiet and let them process the reasons and solutions.

    As a family we establish a budget for extra-curricular activities, too. My daughter wants to play every sport every season and go to every camp every week when school is not in session, which just isn’t realistic. We discuss the cost of each, including supplies, clothing, and transportation. Armed with our approved list, costs, and a budget, the final decision is hers.As with clothing, working through the decision process helps her understand money management. It also changes her perspective about the amount of money required to fund life’s needs and wants.

    Some families don’t budget ahead for these purchases, buying what they need when they need it. Even if that method works for adults, it can negatively impact children. In today’s world, youngsters need better money management skills than ever before, as demonstrated by the many teens, college students, and young adults who are struggling because spending boundaries were never communicated and budgets were never established.

    Just like other life lessons, financial concepts deserve attention from a young age. Begin today by helping develop your children’s financial skills. It’s an investment of time and love that may positively impact their quality of life – for life.

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    Angie Shay
    Angie Z. Shay has worked in the financial services industry for more than 22 years. She is president of THE PATH Financial Strategies, LLC. Angie Shay is a financial adviser with Eagle Strategies LLC, a Registered Investment Adviser and an indirect wholly owned subsidiary of New York Life Insurance Company. THE PATH Financial Strategies, LLC is not owned or operated by Eagle Strategies or its affiliates. Neither THE PATH Financial Strategies, LLC or Angie Z. Shay provide tax or legal advice.