There are many different educational techniques that may be used to aid in the development of financial responsibility in children and young adults. Clear communication and discipline must be stressed when developing a new financial skill in a child. One of the most commonly used techniques today is known as the "Pocket Book Technique."

Pocket Book Technique (Ages 7-18)

The practice of accounting for real money is one of the most effective skills that a child or young adult can acquire. By using a small pocket book or notepad to account for expenditures as well as earnings the child has an opportunity to grasp the idea of financial responsibility through daily practice as opposed to necessity.

The child must keep all receipts from purchases made and also maintain accurate bookkeeping. All purchases made must have logical and beneficial reasoning behind them and a budget must be created. The parent is responsible for double-checking the work of the child of young adult and in questioning the reasoning behind their purchases. First and foremost, the budget is an essential part of the pocket book technique and distribution percentages should reflect actual budget percentages on a smaller scale. A very good budgeting example is as follows:

Weekly Budget For Allen

Earnings: $10.00

Future Savings: 25% or $2.50

School Snacks: 15% or $1.50

School Supplies: 30% or $3.00

Daily Misc.: 15% or $1.50

Monthly Savings: 15% or $1.50

Rollover Percentage

The combination of future savings and school supplies commonly represent the average household expenditure in monthly bills and mortgage, which is approximately 55% or less. School snacks and daily misc. represent food purchases as well as gas purchases and other required business expenditures. Rollover Percentage refers to any unspent money in accumulation from allowed spending percentages. Finally, Monthly savings is exactly that, monthly savings.

Using the idea that money must be saved as a requirement for at least 40% of the budget helps to instill both discipline and responsibility. By mimicking actual budgeting techniques the child or young adult is also being prepared for real life applications. Proper accounting procedures are also key to engraining discipline into the child's mind and everyday life.

The accounting portion of the pocket book must accurate and exact. The expenditures cannot exceed the set percentages and any unspent money accumulated must be placed into the rollover percentage

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