What You Focus on Expands!

We all know that if we track something – our weight loss progress, our mileage toward a 10k, or our money goals, it is much more likely to move us toward that goal than if we just hope for the best. This is a great lesson to teach our kids especially as it relates to tracking our money.

Sending a child off to college is a perfect time to set the expectation that they are to track the way they spend their money (especially if it is your money that they are spending!) but it is also great to start that lesson when they are 5 or 6 and can start to get and use money. Actually, however old your kids are today is the perfect time to teach this lesson.

For the tech savvy folks who are in their teens and have checking, savings, or investment accounts, I like mint.com for handling this task as it lets you link up any financial account that has online access. It’s great for handling multiple accounts, credit cards and the like as it pulls from all sources and is smart enough to categorize spending based on well-known vendors like the grocery stories, clothing stores and gas stations. It will quickly load your transactions and you can see which items it could not categorize and with a few clicks, you can pick your categories.

Most banks have that categorization feature now but you are limited to just the accounts you have with that bank. That may be fine for a checking account and a credit card but once you add in investments and other types of accounts, you lose the “one stop” capability that mint.com provides.

When categorizing, I think fewer categories is best – I actually like “must do,” “want to do,” and “stuff.” That makes sense to me, it’s easy, and I can always expand the category to see the details. You can also break out college, entertainment, travel, eating out, gifts, etc. What is important is to pick categories that will help drive behavior. For me, there isn’t much I can do about “must do” items like gas, doctors, and school supplies. It doesn’t really matter much to me what all went into that category so knowing all the details isn’t going to change the way I spend next month – if my car breaks down, I must fix it, so there you go.

“Want to do” and “stuff” are a completely different ball game, though. I don’t want to see my stuff category getting very much of my money! And I want to set a goal for that “want to do” category and see myself hit that goal every month (or come in under) so for that one I am looking at my trend.

Those categories may work well for your college student and maybe your high school student but you may want to revise those for younger children. There certainly ought to be a savings number for everybody (even poor college kids can tuck away a few bucks a month to savings).

A critical piece of this tracking is to think about it after the fact. How do you feel about the way you spent your money last month? That is good question to ask your kids and have them set a goal to make a change if they don’t like the backward glance. It isn’t necessarily a time for mom or dad to critique their spending; it could be a whole lot more valuable to let them evaluate it for themselves.

For college and high school students, this is a critical skill that will serve them a lifetime so stress the importance of this practice every month. If mint.com isn’t right for you, excel has a lot of budget templates, or a plain old pencil and paper will get the job done. The how isn’t very important, doing it is, so whatever works if perfect.

If you want your money to expand, focus on where it’s going, make sure that you feel good about that, and know that continued focus will help you feel better and better about your spending and your financial awareness. Those are powerful lessons for our kids to learn that will benefit them in all areas of life, not just the financial so here’s to a lot of expansion at your household!