''Let's pretend''-How To Explain the Family Budget to Your Kids from Kiplinger.com

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Consider a kid's-eye view of the world. Food appears on the table. There's always (well, almost always) another clean shirt in the closet. A car and driver to chauffeur you from place to place. Flick a switch and the computer turns on. Flick another and you're watching Nickelodeon. Life is good. Life is cheap.

Gong! Sorry, but you're in the hole already. And you haven't even gotten to the good stuff yet, like movies, clothes and CDs. You can forget the bicycle, unless you decide to ditch the car and pedal to work. On the other hand, you could get a higher paying job, which will require more education, so you may have to take out student loans. But that's life.

    "With so much taken care of for them, it's not surprising that children can't appreciate what it costs to keep a household running," says Janet Bodnar, Deputy Editor of Kiplinger's Personal Finance Magazine and Kiplinger.com Columnist. To give them a glimpse into the real world (which might prove eye-opening for you, too), Bodnar suggests playing the following version of "Let's pretend," suitable for children of about 10 years old and older:

"Let's pretend that you're 18 and on your own. You work full time at a fast-food restaurant making $5 an hour. That's $200 a week for 40 hours of work, or $800 a month -- enough to buy quite a nice bike, right?

"But you won't actually take home $800, of course; after taxes, your pay will be more like $700. And, remember, you're on your own now, so you'll have to rent an apartment. (Check market rents in your local newspaper. For our purposes we'll use $350 a month.) You'll have to pay for electricity and heat -- but let's give you a break and assume that utilities are included in the rent.

"Now you're down to $350, out of which you'll have to buy food. To keep things simple, figure that you'll spend about one-fourth of what we spend as a family of four, so your share is around $30 a week, or $120 a month. Remember, that's just groceries, not restaurant meals or pizzas!

"You'll want a phone to talk to your friends -- and maybe, once in a while, your old mom and dad -- so that's another $20 or so a month (not counting the installation fee of $30). Can't do without the cable? Subtract another $30 a month. (And you thought it came with the TV!)

"Let's see, now we're down to $180. You already have a car -- after all, we're just pretending -- but gasoline sets you back around $15 a week (we'll assume you learn how to change your own oil). There's also the not-so-small matter of car insurance, at $1,500-plus per year for someone who's still a teenager.

"Gong! Sorry, but you're in the hole already. And you haven't even gotten to the good stuff yet, like movies, clothes and CDs. You can forget the bicycle, unless you decide to ditch the car and pedal to work. On the other hand, you could get a higher paying job, which will require more education, so you may have to take out student loans. But that's life."

Of course, your own family income is almost certainly higher than $800 a month, but so are your expenses. Even if you don't share the details of your household finances, running through an exercise like this can give your kids a frame of reference -- and silence the pleas for a bike.

For more great personal finance advice, visit http://www.kiplinger.com.

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Joyce Artinian
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