Written by…Karyn Hodgens, author of Raised for Richness

(Note from Elisabeth: thought maybe you didn’t get enough of the gardening metaphor from last week’s Financial Gardening article!)

When my oldest son, Nathan, was four years old, I caught him crying silently in bed one night.  I had gone back into his room to tuck him in as he liked to spend a few minutes “reading” to himself before saying goodnight.  Seeing him crying concerned me.

“Nathan, what’s the matter?” I asked.

He lifted the book he had been reading and turned  to the page where a cartoon representation of a slug was sitting behind a ticket booth.  The sign read:  Hugs and Kisses $1.00 50¢ 25¢ 05¢. The book he was sharing with me was called The Unhuggables:  the truth about snakes, skunks, spiders, and other animals that are hard to love.

“He looks so sad,” Nathan sniffed, pointing to the slug, who did, indeed, look pretty sad.  “No-one wants to give him a hug.”

Not being a huge fan of slugs, myself, but relieved that this was what made him upset, I had to quickly figure out what purpose slugs served.

“Oh, honey,” I stalled, “Slugs are misunderstood.  They’re actually quite useful.  They decompose a lot of dead leaves and that’s a very good thing because it puts nutrients back into the soil which helps flowers grow.  But not many people know this otherwise I’m sure they would be giving him hugs and kisses.”

I actually impressed myself that this little bit of information about slugs surfaced in my brain.  I guess I really was listening in biology class.  And the good news is that hearing this seemed to satisfy Nathan.

“We should tell people that slugs are good,” he said.

“Yes, we should,” I agreed.  Five minutes later, he was asleep.

Budgets are like slugs.  They’re often misunderstood.  And because of that, people find them unhuggable.

But budgets actually serve a very important function.  Budgets help us get the things we want in life:  a new car, a house, college education for our kids, more time with our family, the ability to travel to exotic places…  Money is the tool that can help us achieve those desires.  A budget helps us use that tool effectively.

So teaching our kids how to budget is important if we want them to achieve their goals in life.  Kids budgeting?  Of course!  The good news is, teaching them is pretty simple.  Here are three ways to give your kids hands-on experiences with budgeting (excerpted from the book Raised for Richness):

The Birthday Party – ages 7+

Decide how much you are willing to spend on your child’s birthday party.  Get CASH in that amount (that’s your budget) and put it in an envelope labeled ‘(Sara’s) Birthday Party’.  You’ll use the envelope to help you keep track of your running expenses.

Then have your child help you make a list of all the expenses related to the party.  Making a list will help you stay focused when you’re shopping.  And thinking of these in advance will teach your child to be organized.  She’ll need to consider number of guests, party games, food, party favors, paper plates, etc.

Now the fun part…you get to go shopping.  As you buy items, write the total on the envelope and keep a running balance.  Using cash will underscore the value of a dollar (it makes a difference if you can SEE the money) and help you stick to the budget.

Tweens and teens can go a step further and come up with the “flow” of the party…when to play games, when to eat, etc.

Clothing Allowance: Tweens and Teenagers

This is a great back-to-school-shopping activity, but can still be used any time of the year.  Tweens and teens are quite capable of shopping for themselves.  They may make mistakes along the way, but those are great learning opportunities.  So giving them a lump sum of money and putting them in charge of spending within the limits of a budget is good practice.

Just like the birthday party activity, begin by deciding how much you’re willing to spend on clothing.  Consider how long you expect those clothes to last.  In other words, are they shopping for all their fall/winter clothes?  Then have your child make a list of needed items:  2 pair of jeans, three t-shirts, socks, warm jacket, etc.

Again, get CASH in the needed amount.  Tell him that he needs to buy all the items on the list and any money left over is his to keep!  This usually gets kids to think carefully about their purchases and look for good deals.  Instant savvy shoppers!

The Cell Phone: Teenagers

Parents have been handed an unbelievable tool to help teach teens how to budget.  It’s the cell phone.  Yup, that object of love and hate.  Done correctly, it becomes an object of learning.  Here’s how.

Teens need to stay connected to their friends.  This is normal as they figure out their place in the world.  Cell phones keep them connected.  Using their “need” for a cell phone as the motivator, we can teach them basic money management skills such as budgeting and paying bills.

First, teens need to know that along with a cell phone comes responsibility.  Keeping track of your cell phone, resisting the urge to text during dinner, and paying your phone bill.  Kids paying bills?  You bet!  And the best time to teach them is while they are still hanging out with you.

Next, it’s important to establish what part of the phone bill your child will be responsible for.  For example, you may pay the family plan fee but maybe your teen pays the additional phone line fee, texting, and upgrades…

Now comes the fun part.  Kids learn to budget their money in the context of something they love…their cell phone!  Upgrades?  They pay.  Overages?  They pay.  Lost phone?  They pay.  Unpaid bill?  No phone.  See how simple it is?  Okay, so it’s going to take a few months before everyone understands how the whole thing works, but when that happens, it’s a thing of beauty.  Kids are happy; as long as they budget their money correctly, they stay connected to their friends.  Parents are happy, their kids are learning real life skills.  It’s a win/win.

Although a lot of parents are willing to pay for their kids’ cell phones because it offers peace of mind, how about the peace of mind that comes with knowing your child is ready to take on the financial challenges that await her out there?  Don’t miss this silver platter opportunity.  With teens, when you get the chance, take it!

Check out Karyn’s cool financial software for kids to see what she is up to these days.