By Jayne Berkaw According to www.word-origins.com/, a “budget” was originally an Old French bouge, or leather bag. “The word’s financial connotations arose in the 18th century; the original notion being that the government minister concerned with treasury affairs opened his budget, or wallet, to reveal what fiscal measures he had in mind.” Today, depending upon which site you refer to; it’s simply a financial plan, a plan of allotment, an itemized estimate, etc.
One of our earlier blog responders suggested that “budget” has negative connotations these days, so he prefers “spending plan.” He suggests that this indicates that the planner is in control of his or her own financial destiny. I agree that “budget” drops with a thud into the pits of many of our stomachs, so I’m adopting his view. Down with budgeting; up with spending plans!
No matter what you call it, though, your kids need to know how to do it. Start by giving them everyday examples of what a dollar (or two or ten) can buy. Using different amounts, explain how many or few items like candy bars, pencils, books, movie rentals, etc., can be purchased with various (small) amounts of money. Increase the amounts and sizes of your examples over time. Once is not enough on this lesson. Do it a lot, maybe making it into a guessing game to keep it fun and interesting.
Then help them come up with their own spending plan – a written account of their “income” (allowance, gifts to them, earnings…) and their “expenses” (donations, gifts for others, long-term savings for larger ticket items, and short-term savings for weekend or after-school fun…). FamilyMint is an amazing resource for teaching kids financial planning and goal setting in the interactive, online world that they will operate throughout their lifetimes.
We help our college-going son with this process each year as he figures out what he’ll need for apartment rental, food, books, clothes, fun…and savings. As he’s gotten older, more complex topics such as handling credit and debit cards, car payments and other debt issues have been added, along with where the money will come from to cover all of these expenses.
No matter how old you are, no matter how much money you have, a spending plan is your way of assuming control of your life. Do it for yourself and, more importantly, teach it to your children.