How I Introduced Budgeting to My Daughter

I live in Singapore with my wife and our eight years old daughter. Over the weekends, we usually do one of four things:

• Nothing, sitting at home watching TV
• Go cycling in the morning to an island nearby and come back by noon
• Cooking & Painting
• Go to a mall

Every time we go to a mall, my daughter would insist on visiting toy stores and throw tantrums so that we buy things for her. We don’t. And in this entire process, we ruin our fun trip to mall. Apparently, this is a very common sight among kids these days.

Initially, we dealt these situations using out natural instincts. We would tell our daughter that we will not buy candy this time no matter what, and this will make her feel bad and eventually everyone will feel bad. We also tried setting the expectations upfront even before we leave house. Our daughter will agree to whatever we say but back to square one the moment she sees something interesting.

Overtime I learnt that it is best to become the third person in such scenarios and think what this third person would feel. For instance, if I am denying my daughter’s request, then the third person will see that the daughter is sad and the father did not explain her why he is refusing her demands. Thinking as the “third person” gave me a whole new perspective of looking at things.

I decided to use creative approach to manage this situation. On first Saturday of the month, I sat with my daughter and I gave her 7 dollars. I told her that she can buy whatever she wants. She got hyper excited. My wife gave her a small wallet to keep her money.

I told my daughter that it is a huge responsibility to have money and spend it. My daughter replied laughing, “it is super easy to buy candy”. I nodded smiling. Then I explained her why it is very important to think before spending. For example, if you buy something that you don’t enjoy, it is money wasted. If you buy something unhealthy, it is wasted. If you run out of money, then you cannot buy things that are important. Since this was a difficult topic to teach, I tried to simplify it.

I explained the concept of wants versus needs. Needs are things that are necessary. For instance, a pencil is a NEED whereas a pencil with bunny eraser attached on top is just a WANT. A rough notebook at home is a NEED but a fairy style notepad is a WANT. I taught her to ask this question about everything she ever wants to buy: is this a want or a need.

We practiced a lot with many items, ice-creams, clothes, shoes, chocolates and very soon she got the idea. A tip, only use examples that are not boring to keep it interesting.

Once she understood the concept, I explained her that we must have our NEEDS and we should have only few WANTS. This is because needs are limited but the wants are not. Once she understood this, it was easy for me to explain her that she cannot buy everything she wants, she already got the point.

With this background, I gave her freedom to spend her pocket money. I told her that she can always ask me for suggestions. I did my best to remind her about the repercussions her decisions might have. It was usually about how much would she enjoy if she buys this ice cream and how much money will she have remaining if she spends some of it. It was my way of reminding her about depleting resources.

On our first visit to the market, she spend five dollars. That month, we went to the mall for two more times, but this time she did not have any money left to spend. She felt sad but it was a good lesson for her to plan for future. It took her four months to really understand the concept of budget and watching the spends. We jointly agreed and increased her allowance to eight dollars per month. But now, she spends half on eatables and remaining half on things that she likes. Usually these are either fancy stationary or some toy stuff, but she is happy about it.

Once she found a spray-on crafts can set that was 11 dollars and she decided to buy it. That month, she only spent two dollars so that she will have more the next month. She bought it the next time when she has enough money.

It’s been eight months since we started this. There have been some really pleasant surprises as well. This July, she spent five dollars to buy a birthday card for my dad. It was an amazing gesture, where she valued the card more than the things she usually buys. I felt proud of her.

Overtime, our discussions about money has matured and I am trying to explain her the value of money. What strikes me is that if we take genuine interest in teaching valuable life lessons to our kids, it takes the form of core values for the kids.

We wanted to share our experience. Many times it doesn’t occur to us that we are not our best versions and there is always scope of improvement. The minute we want to improve, we can always find something to work on.

Happy parenting.

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Previously Published on medium