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Set an Allowance
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Step 3:
Help your child budget
Managing money within one's means takes practice. Obviously five-year-olds aren't going to understand detailed budgeting, but they can learn from the examples you set. If you're there to answer questions, help them count and make change or put their money in a piggy bank, you're helping. But don't be surprised when all they want to spend their allowance on is candy and toys.
By eight to ten years old, many children become more reasonable about their spending. Sometimes they even save up for something or offer to do extra things, like new chores or a paper route, to earn more cash. Eventually they begin to truly understand how budgeting, savings and interest work. When this understanding is attained will depend on the individual, so don't be discouraged if your teenager is still spending feverishly.
When children are ready to begin budgeting, you can help start a system that will show them how to keep track of what goes where, when and why. Many kids welcome a written budget, such as a chart or even a notebook where they can keep track on their own. You can also show them how to divide and designate the money for specific purposes (such as using different envelopes to hold lunch money, personal expenses, savings and so forth).
The basic goal is to help your child understand that responsible behavior, including making budgeting a habit, reaps great rewards.
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