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Raising Children on a Budget Part 2: Solutions

Raising Children on a Budget

We see it all the time, children throwing tantrums in stores because their parents refuse to buy them an item. Some parents give in so the child will stop crying, and others stand their ground and allow the child to scream all the way out the door. Raising children on a budget can be hard, gut-wrenching work. You don’t want to spoil them, but you also want them to experience a great childhood- so where is the line?

How to say no

It’s natural for children to want material things, so parents need to help them learn how to control those desires. Instead of answering with a flat no, give them input that will calm the situation and contribute to their character development and self-control. For example, give them an idea of when they can expect to receive it (waiting until their birthday or Christmas) which teaches patience, or tell the child he has to earn or save for it.

In his article Allowances for Kids, Dr. Jeremy Shapiro said, “Young people whose parents modeled responsible money management, encouraged them to save, and taught them the rudiments of budgeting grew up to be adults who had less debt, more savings, and a generally stronger orientation toward the future. Thus, parents who guide the development of responsible money-related behavior in their children not only improve their own financial healthy, they improve their children’s future financial health, as well.”

Creating a wish list

A great suggestion from Dr. Shapiro in Saving Money and Raising Children is to have children create a wish list of their requests. This teaches children patience and to become future-oriented, and it comes in handy when parents and family members need ideas for birthday and holiday gifts. It also gives children something to look forward to.

Building Independence


A great way to build independence in children is to start an allowance based on their overall performance each week. For example, they completed all of their chores, were helpful and polite and did well in school. One rule of thumb says that a dollar per week for every year of the child’s age should be the amount earned. If behavior is unacceptable or they refuse to do chores partial or full loss of allowance is the consequence.

As children get older, allowance can be increased and parents should stop providing money on demand for routine expenses like outing with friends- teaching them how to budget. If they overspend in a certain area they may need to stay home a weekend or two. “The idea is to give the child more control, not more wealth’ financially, the parents and child should both break even. The larger the allowance, the more purchases they youth should make for himself, and the less he should ask his parents to hand out money,” says Dr. Shapiro

Pay for work

Parents can also provide children with a way to earn money by paying them for larger jobs outside of their routine chores, like yard-work, house and pool cleaning. This is cost-effective for parents if they typically hire someone to perform these tasks, and it also gives children responsibility which leads them to learn discipline and independence.

Teach them how to budget

Parents can get creative and use different variations of allowances to control their children’s spending. One way to do this is to put them on a budget, especially in areas where their appetite is excessive. For elementary aged children excessive spending may be on toys and for teens and preteens it may be on clothes and shoes.

Parents can look back on their children’s past toy and clothing purchases and come up with a budget and time allotment for those areas. For small children, explain what the budget is and how it will work. He has x amount of dollars to spend on toys each month or semester, every time you buy a toy for him you subtract that amount from the budget. If he spends the entire budget before the time allotment is up, stand your ground and don’t add to it. The same goes for preteens.

For teens you can allow them to control their own spending. Set a budget and discuss it with them. Think about putting the budgeted amount (preferable monthly) on a prepaid credit card or opening up a checking account for them. This will give your teen more responsibility and will teach them to become financially independent.

Dr. Shapiro says that this approach offers a sustainable solution, with everyone happier than they were before. “The expensive tastes that used to be the parent’s problem are now the adolescent’s problem. Youth who used to resent their parents for being cheap now resent the producers of designer labels for selling overpriced merchandise. Sub-allowances get parents out of the business of micromanaging their teen’s wardrobe and bring teens face to face with real questions about what various brands and styles are worth.” If your teen runs out of money and asks for more, again, stand your ground. “When things go this way, young people eventually realize they did not understand how their expenditures add up over time – which is exactly the lesson they need to learn.”

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