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Financial Knowledge - Budgeting and Account Balance

Financial Knowledge - Budgeting and Account Balance
"""When I asked parents what life skills they wished their children knew, I was surprised to hear a resounding request for a few topics:

How to Set Up a Bank Account
Budgeting and Account Balance
How to Write a Check and Pay Your Bills
How to Begin Saving for Retirement
Some of the things we take for granted appear to be missing from what we teach children as a result.

The previous article concentrated on opening a bank account. This is the second article in a four-part series on teaching children to budget and balance their accounts.

Budgeting

It's no surprise that budgeting can be boring and time-consuming. I've never been excited to sit down and make my budgets, but it's something that generates wealth and pays off in the long run.

So, how do you get kids interested in it? How do you add a little glitz to something so mundane? Make it a game with a payoff.

To begin, it is critical to understand how to create a budget and then stick to it.

Making a Budget

It's fine if you have your own method for creating a budget. In my opinion, the simplest way to create a budget is as follows:

Draw a line down the center of a piece of paper:

Spending Plan

Put your average monthly gross income at the top of the page, then multiply it by.80 (for example, if you earned $1,000, you'd end up with $800).
Fixed Charges
Put all of your FIXED expense categories (such as phone bills, insurance, and mortgage payments) in one column on the left side of the page.
Variable Costs
Next, enter the variable expense categories (for example, food, gas, leisure, etc...) in another column on the right side of the page.
Enter all of your expenses.
Budget Net After Fixed Expenses - Subtract fixed costs from your spending plan. If it's a positive number, nothing needs to be changed. If it is zero or a negative number, you should look for ways to reduce or eliminate expenses.
Budget variable expenses - Using your Net Budget after fixed expenses, determine how much you can spend on variable expenses each month without going over budget.
Set a budget for each variable expense so you know how much you can spend in each category each month.
Making it Interesting

Now that you've outlined your budget, it's time to get the kids excited.

""My kids will never be excited for this,"" you're thinking.

They will if you give them some sort of incentive or payoff. Here's how it's done:

First, explain the concept of a budget and show them the paper. Tell them you're going to hold a contest (if you have more than one kid, this works even better).

Contest Number One: Budgeting

The first competition is to see how close they can get to a break-even or $0 budget over the course of a month. In other words, the goal is to forecast your spending as precisely as possible.

If you have more than one child, the one who comes closest to breaking even without going negative wins a prize. Tell a single child that they will receive $5 or $10 if they reach break-even, and that for every penny they are off, you will deduct 1014

Second Contest - Saving After Spending

The second competition will test their ability to budget their money over the next 30 days. Tell them that if they can save money, you will give them whatever they save. That is, if they save $5, you will match it (similar to how companies match 401K contributions).

If you have more than one child, tell them that whoever saves the most will win and receive a special prize. You will obviously select the prize because you are the most familiar with your children.

Soon to come

In the following article, we'll go over how to write checks and pay bills. You will also learn how to combine check-writing with these contests to prepare your children for the real world of budgeting."""
 

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"Financial Knowledge - Budgeting and Account Balance" was written by Mark under the Finance category. It has been read 77 times and generated 0 comments. The article was created on and updated on 13 January 2023.
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