Try showing them the total amount of money that you have per month to spend, and then subtract monthly expenses such as insurance, car payments, and mortgages, and then show them the smaller pile of money that’s left over for “fun” expenses. This sounds like it might bore a child to tears, but you’d be surprised at how interested some of your children will be in learning about money. Even for the ones who are somewhat less charmed with the whole process, it’s still worthwhile to explain! Older kids generally have the mental capacities to understand more about finances, and this is a great time to bring concepts like a mortgage into the mix, and explain how these work.
You can even bring in issues like the stock market and 401Ks at this point if you feel confident in your abilities to explain such things in a way that an older kid would understand. Either way, the most important thing to keep in mind is to teach your children how to budget. Again, an allowance is a fabulous way of letting your kids figure out their own budgets. Help them divide up their allowance into several different categories – some for savings, some for spending, some for charity – and figure out what he or she truly values.
Be sure to let them decide for themselves how much to save and spend at the end of the month – after all, it is their budget. However, if your kids just seem determined to spend all of their money all of the time, try opening up a “home bank” and offering high interest rates should a kid decide to keep their money in the bank. Once kids figure out that saving money can make them money, they’ll be a lot more apt to do so! Being able to budget is a skill that many adults lack. Instilling budgeting values in your kid as a child will help them succeed as an adult and live a much more stable financial life.