Budgeting, which is creating a plan of how to spend money to avoid falling into debt, should be introduced during a person’s childhood years. But training youngsters in this skill is not an easy task. Human beings are naturally inclined to spend money than save it. And this is true even with little children. But this matter can be addressed by employing a gentle but effective approach to train youngsters in this skill, to eventually make them in prudent managers of their financial resources in their adult years.
Atmosphere for Training
In order to achieve this, a child’s parent/guardian should first set the atmosphere conducive for such training. This can be done by carefully and gently explaining to a youngster the importance of money as a resource. It is important for a parent/guardian to make a child understand that money, like any type of resource; can be used up and wasted away needlessly if not used wisely. For a youngster, coming up with a clear understanding of this principle is of foremost importance. Questions such as “How should I spend my money?” and “What should I buy if I have money?” are good queries a parent/guardian should ask a child during this initial stage of training.
It is important for a parent/guardian to provide a simple but clear definition of needs and wants to a youngster. A need can be defined as something in life that is essential for survival, which basically pertains to food, clothing, and shelter. A want is simply something that is liked and/or just even preferred to have. A clear understanding of this difference is also crucial for every child if he/she is to be trained well in budgeting so he/she can spend his/her financial resources wisely later as an adult.
Savings and Investment
In order to train a youngster in intelligent financial spending, it is also important for a parent/guardian to introduce the concepts of savings and investment at an early age. Savings can be defined as a portion of one’s income not used for current expenses but set aside for future expenditures. And encouraging a child to use a piggy bank, which is the most common approach of training youngsters to save money, might be the ideal tool for doing this.
Investing one’s money can be defined as an activity wherein a person carefully and systematically engages in to gain profit from what he/she has spent his/her financial resources on. This might pose a challenge to a parent/guardian due to a youngster’s limited mental capacity. A good approach of doing this is through telling fantasy and/or real-life stories on this topic to bring its meaning down to a child’s level of understanding.
Sharing his/her successful personal experiences on wise financial spending as a result of good budgeting can help a parent/guardian encourage a child to follow his/her example. Also, telling stories of successful people who are well-known for their budgeting expertise might further reinforce a youngster’s resolve to emulate the habit and manner of spending of one’s finances in the future. All these help provide an environment conducive for the child to be trained in the habit of wise spending.
Concepts in Psychology
Applying some concepts in Behavioral Psychology, such as reinforcement can help increase the likelihood of manifesting desired behaviors related to wise financial spending, as a child undergoes the budget training process. Reinforcement can be classified as positive and negative. The former is giving a reward. An example of this is giving words of encouragement to a child who was able to prioritize a need from a want.
The latter is removing a negative stimulus from someone after a desired behavior is performed, to increase the chances and rate of a behavior’s occurrence in the future. Giving a child regular supply of monetary allowance after a time of withholding it is an example of this. Conversely, punishment is presenting a negative stimulus to someone in order to lessen the probability of a specific behavior from taking place in the future. It is usually given right away after an undesirable behavior has been shown. An example of this is immediately withholding from a child his/her allowance when he/she spends money carelessly.
Like reinforcement, a stimulus can be classified into two (2) types – external and internal. External stimulus is anything that is brought to a person by his/her surroundings while internal stimulus comes from within a person. An example of an external stimulus can be a toy that entices a child to spend money to buy it, while an internal stimulus is the feeling of guilt a youngster might feel that makes him/her to think twice before purchasing it. Both of these play important roles in the aspect of motivation, which should be taken into account in budget training. Extrinsic motivation is doing something to receive a reward and/or avoid punishment, while intrinsic motivation is performing a certain activity just for the sake of doing it.
Parents/guardians are encouraged to build on the latter type in relation to budget training since this covers a person’s character and values. Good money expenders know the value of financial resources and use them wisely not only for their benefit but for others as well. Effectively employing these principles in psychology to a child’s budget training will prove to be helpful in making him/her a wise manager of his/her finances as an adult.
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2nd image by Stuart Miles / freedigiphotos.net
3rd image by cooldesign / freedigiphotos.net