Wednesday, June 5, 2013

Summer is a Great Time to Teach the Kids about Personal Finance

As our first child gets older, I’m starting to find that summer can be a great time for us to teach him about certain aspects of personal finance.  In our family, with a dad who is self-employed and a mom who works in the school system, summer provides us not only with a lot of time for teaching but a situation in which personal finance comes into play in a number of areas of our lives and in a variety of ways. 

Therefore, we are starting to take this warm-weather opportunity to try to teach our son about certain money issues by way of illustrations from our own lives.  Moving forward, I think that this will be a great time of year to focus on several pertinent personal finance factors relating to his money education.

Budgeting
With my wife not working summers and me as a self-employed, work-at-home dad, income during the summer plummets significantly.  This means that our budget during this time is even more important to our financial lives.

While I keep a regular running budget at all times, during the summer, I tend to drill down even more into costs since we still want to have fun as a family -- and have more time for doing so -- but don’t have more money for doing so.  This means that rather than just allocating money for our “entertainment” line, I tend to break that amount down into its various components that comprise what we’d like to do each month.  This way I can get a more exact feel for what costs will be and ensure that we can break such events up over the course of the month so that we aren’t doing a ton of stuff one week and nothing the other three.

This coming summer, I plan to involve our five-year-old (by then six-year-old) in the process so that he can see what I do and even take part in making some of the decisions on what we do and when.

Forecasting
Again, since my wife is off for over the summer, we have to make my income last over a multi-month period.  This means that it’s pertinent that we forecast not just for expenses in our summer budget, but income as well over the multi-month timeframe.

I hope to use our forecast from May until September to illustrate to our son how financial planning takes place.  I want him to see in a basic way how we have to ensure that expenses don’t override income, as well as the addition and subtraction math we do to ensure that we end up in the black at the end of this season.

Denial of Self-gratification
Summer is also an important time for teaching our son a little about denial of self-gratification.  Due to our lower income during this time, there are some things we may not be able to do.  I plan to give our son a list of entertainment options that we tend to do throughout the summer and have him select a few out of that list based not only on what he would like to do, but upon the cost of those events, giving him a small budget of his own with which to work.  This will make the process fun, as he’s picking out entertaining things for the family to do, but educational as well as he has to base his choices on pricing and the amount of money he has to put toward them.

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