Sometimes we have to delay spending to save for larger purchases. This can be difficult for some younger kids who might be anxious to buy something now. Saving for short-term and long-term spending goals is an important money management skill and an excellent way for tweens to decide which purchases are really important to them.
While saving for short-term goals, such as a new video game, may take only a couple of weeks, longer-term goals require dedication: it could take months or years of saving to have enough money for the purchase. You can help your child create a budget for the purchase and figure out:
How much they’ve saved already.
How much the item will cost (including tax, shipping and any necessary accessories).
How much money they expect to earn each week.
How long it will take to save.
Assume, for example, that your child wants to buy a new mountain bike. The bike costs $800, and he or she has $200 saved so far and will need to save another $600 to buy it. Help your child create a budget that shows the starting balance ($200), expected income (in this example, from dog walking, pet sitting, yard work and two gifts), weekly totals and a running balance. You can use a spreadsheet program (see below), pencil and paper or a budgeting app. As the figure below shows, your child will have enough money to buy the bike after 17 weeks of earning money and saving.
Point out that for this budget to work, your child has to avoid all other purchases during this 17-week time period; otherwise, it will take longer to save for the bike (which is OK…he or she just has to plan for it). If your child can’t get by without some spending money each week, just make sure to build it into the budget. If you want to help buy the bike, discuss what your contribution will be ahead of time so it can be worked into the budget.
The important thing here is to make a budget and stick to it. It will be a valuable experience if your child can save for the entire 17 weeks without you “bailing” him or her out at week 10 and saying you’ll pay for the rest. It’s OK if you contribute a certain amount of money by offering a savings “match” or paying for extra jobs around the house (all of which should be built into the budget). Just set it up ahead of time so it’s not a bailout.
This article was written by Jean Folger of Investopidia and was legally licensed by AdvisorStream through the NewsCred publisher network.