6 Steps To Raise Financially Responsible Children: Step 2

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Create a Budget

Luckily most children have a positive cash flow since they can only spend the money they physically have in their possession. However, the time will come – and sooner than you think, when your child will have access to credit and he will need to learn to manage his cash flow. If he can master the budget making process early and stick to it, then he might just be ready for his first credit card. A mature 14 year old could be prepared to use a credit card responsibly while an inexperienced 18 year old might not be prepared. You need to decide how your child has advanced through his fiscal training before you make the decision to provide him with this powerful financial vehicle.

College Student are bombarded with nearly 20 credit card applications per semester. They obtain these credit cards when they start college and get in over their heads very quickly. It can be a frightening experience for a young adult to owe thousands of dollars they cannot pay back. You can help prevent this entire cycle with some advance planning and education.

If your child has been writing down for several months what he has been spending his money on, he will be ready to put together a rudimentary budget. He will be able to see a buying pattern and make a guess what he needs and wants in the future. You want to keep his first budget as simple as possible. Most adults don’t follow a budget because it seems too complicated to plan and time consuming to manage.

Below is a sample budget. You should create you own in a spreadsheet program such as Excel.

Weekly Allowance for Brittany: $14

Allowance Guidelines:
50% can spend freely
25% for short-term goals
15% for long-term goals
10% for charity

 

Budget:
$7.00 spending money (anything – within limits)
$3.50 short-term goals (saving for concert, saving for horseback riding lessons)
$2.10 long-term goals (saving for mountain bike, saving for college)
$1.40 charity

 

Spending Money $7.00:
    Week ending      
Budgeted   1/7/02 1/14/02 1/21/02 1/28/02
Candy $1.00        
Toys $3.00        
Bus Fare $2.00        
Misc. $1.00        

 

Short Term Goals (saving for concert, saving for horseback riding lessons)
Budgeted 1/7/02 1/14/02 1/21/02 1/28/02
$3.50        
money saved to date        
$55.00        

 

Long Term Goals (saving for mountain bike)
Budgeted 1/7/02 1/14/02 1/21/02 1/28/02
$2.10        
money saved to date        
$125.00        

 

Charity
Budgeted 1/7/02 1/14/02 1/21/02 1/28/02
$1.40        
money saved to date        
$28.00