Sunday, 15 September 2013

Financial Responsibility

Money smart concept #1
Financial Responsibility
Smart spending is the key to financial responsibility. Allowances can be a good first step to understanding spending plans or budgets. Even young kids are capable of managing small amounts of money. Parents have to decide how much allowance to give and how often(i.e weekly, monthly, etc.). Rules on allowances have to be clear so that you do not fall in the trap of bailing them out. It does not teach children financial responsibility if they feel that they can spend as much as they want since they can always ask for more money.
            For kids to make responsible decision on how to spend their allowance, parents have to introduce early on the idea of “NEEDs and WANTs.” Kids will want many things but will only need a few things.
            Use their language when discussing what to buy. You may want that now but you don’t need it. Or I understand you want to spend all your money on that comic book, but if you do, you won’t have money to buy snacks in school tomorrow. I don’t think you would like to be hungry, let’s figure out how you can save a portion of your allowance for the comic book”.
            When kids are not given the opportunity to work within a budget, they lose sense of the value of money. If they feet they need shoes, they can either spend P3,000 or P300 to meet their need, but if not properly guided, they may not think twice about spending P3,000 for something they want.
            We need to teach children to ALLOCATE their money properly and balance their needs and wants. For older kids, you can go a step further and talk to them about using their budget to spend, save or give.

With proper guidance in managing children’s allowances or money, they can grow up to be financially responsible adults.

Wish list helps your child understand the difference between needs and wants. Teach your child to prioritize his wish list by writing the list in order of priority. Use the chart to take the opportunity to come up with a spending and saving paln to meet needs and wants

Wish list
I wish for…
I need…

Weekly spending and
Saving plan

Total saving for the week



Budget proposal
Ask your child to come up with a budget proposal for her allowance that is subject to your approval. Help your child think of basic categories for spending (food, transportation, clothing, phone, entertainment, etc.) talk about appropriate amounts to allocate for the categories based on her needs. Ask her to give you the proposal and defend the budget request. Encourage children who may want to have more than what you are willing to give to work for their allowance by doing chores at home.

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