Monday, March 30, 2009

Teaching Children to be Financially Reponsible

Posted by: Allison Franklin

Personal finance: Setting up a home budget can teach children
Georgianna "Shelly" G. Latino • • March 30, 2009

In my last column, I discussed how important it is for us to begin to prepare our children to be fiscally responsible. I want to give you some immediate simple steps that you can take to begin your journey.

First, set up a home budget. It does not have to be lengthy or extensive, just a simple budget of what money comes in and what money goes out - your income, your expenses.
Include what expenses are fixed, i.e., mortgage payments or rent, car payments and insurance, and what expenses are not, i.e. groceries, and utilities. Sometimes it is a good idea to review your bank statements for several months to determine what the average variable expenses are.
You might ask, how can I prepare a budget and follow it every month when my income stays the same, but the variable expenses swing wildly from month-to-month. Well, those are the things you have to prepare for if you are living like most of the population right now paycheck-to-paycheck.
The most important step is the next one - review this budget, and how you determine and prepare for those variable expenses, with your children. We assume that they know what we can afford and what we cannot. The truth is they have no earthly idea. Society has approved of our living above our means for so long that they are left with mixed messages and an acute lack of understanding. They only know what we share, or what they hear from less reliable sources. Communicating with them directly about our own home finances will go further than any class or program and the more they learn the better equipped they will be. In turn, the better prepared they will be.

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