Help Kids to Understand the Money Crunch!

You’ve couldn’t have missed it, news about the financial crisis is all around us. And everybody knows that this eventually will hit the “real” economy. So most of you have probably — at least if you’re smart — looked at your family’s budget, of course in the hope to cut your family’s spending and so that you can put some money aside. You as an adult understand that you can’t spend more than you have, but most kids don’t understand this concept. And when they peer up at you with those pleading eyes for new clothes, video games, movies or other things, than you know that you’ve some explaining to do.

1. Household Philosophy
Now it’s the time — before the economic crisis hit — to develop a spending philosophy for your family. Both you and your spouse should take a hard look at your family’s budget and develop a financial plan for the future. You and your spouse should be both agree on the spending philosophy and most important, share it with your offspring!

One important part of the household philosophy should be that you teach your kids the real value of money. You need to change the way our own children look at money. They need to understand that you can’t buy things like video games if you don’t have the money.

2. Honesty
Be honest with your children. There is no point in lying when the reality of the financial situation is almost on every TV program. Sit them down and explain what this will mean for the family’s budget and be honest (how uncomfortable it may be.) And you should do it now, not when the money is already tight!

3. Get the kids involved
Try to involve the kids in financial decisions; of course not in major decisions, but for instance you could hold brainstorm sessions for saving money on food, setting up a household budget or saving money in general. It not only helps them to understand the situation better, but it also teaching them an important life lesson.

Take a look at our 103 money saving tips and how to put money aside for things that your family need.

Make that you make it fun, especially with the little once. Try to make saving money into a game and hand out weekly “Financially Responsible” awards. Give these awards to the family member who have done its best to stick to the budget or who have found new ways to save money. And remember make it fun, if it’s not than kids will loose interest very fast.

4. Family Saving Goals
Every kid should learn early in life that they have to save money for things they want.
Show them exactly what they need to do to earn and save the money for that item.

A good incentive can be that you match the money they saved. For instance if they want a certain toy you tell them that they have to save a certain amount and if they have reach that amount you will match that amount.

This way they will learn that nothing comes for free and that they have to work or save for things before they can buy it.

5. Frugal Fun
One thing you need to learn your children is that money doesn’t buy happiness. You’ll still have fun, even if you don’t have money to do expensive things. For example a family movie night where you watch a DVD, where you eat homemade cuisine and snacks, can be just as fun as going to the movies. Take a look at these 10 tips to save money on entertainment.

Talk to your kids; explain the family’s financial situation as honestly as you can. What matters most is that your kids know that they will survive on a budget and that the family will survive on a budget. Financial crisis come and go, even this one won’t be the end of the world.

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