MoneyMindedMoms: Budgets - Kids as Chief Financial Officers

Kids and Budgets
I had two older brothers. The older was never separated from any penny that came his way. The younger thought nickels, dimes, and quarters were meant to buy more stuff, more candy, and more fun. What do you do with two boys like that -- one who won't buy a pencil to write with and one who can't keep a penny in his pocket?

Knowing how to save and how to spend is key to a healthy financial future. Appoint your kids as Chief Financial Officer of their allowances to give them experience with a simple budget.

Explain that the Chief Financial Officer or CFO in a business tracks and reports on how the business uses money. Point out that the CFO is a highly confidential position, that financial information isn't shared outside the business or in this case outside the family. Also say that smart CFOs know that some spending is a good thing if it meets the goals of the business.

Say that in their training as CFOs you'll show them how to ...

• Identify how they spend their money now.
  
  
• Decide what spending is working for them and what is not.
  
  
• Set goals for future saving and future purchases.
  
  
• Track their spending to meet those goals.

Be a CFO with your children, for one month track your household spending as they track theirs. Gather together often to record your spending in a chart that shows what you've spent and what it was for.

After that month, have a CFO meeting to review family spending. Choose a goal for the family such as a trip to a favorite location. Talk about what it might cost to reach that goal. How might you free up money to achieve it? Challenge your children to participate in that goal or to set a goal of their own.

Set up a regular CFO meeting to check progress. You may discover that your children need a larger income to cover fixed costs such as lunches and activities. You might find they could be saving more. Be prepared to offer ideas when they are able to take on more chores and responsibilities.

After this exercise becomes a habit, you might be surprised at how your children value money -- yours and their own.