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Teaching Kids about Money
Budgeting skills will stay with kids for the rest of their lives. Kids who learn how to budget now will be able to manage their money better as adults, so starting early makes sense. Use this handy guide to help you figure out what to teach your children.
1. Learn What a Budget Is
Kids won’t know how to budget until they know what a budget is. There are lots of ways to open this conversation with your children.
- Talk to them about budgeting when they want you to buy something for them. Instead of just saying “no” to an expensive toy, explain that it isn’t in your budget. Tell your children that every month you make a list of how much money you’re going to have and what you’re going to use it for.
- Put money in your budget for their needs. Show them exactly how much money is in your budget for these things so that they begin to understand how much you can spend.
- Give them money in the store. Allow your children to do their own budgeting by giving them a few dollars to spend in a favorite store. Talk with them about what they want to spend it on. Before going to the cash register, add up how much purchases will cost. If it exceeds their spending money, help them decide what to put back.
2. Keep Track of Income
Help your kids feel positive about budgeting by starting with all their sources of income. Have them make a list of all the money they’re getting that month, including allowance, money from any small jobs they’re doing, birthday money or other gifts. When the list is done, have them add up how much money they’re going to have. They can always use a budgeting app to help them keep income and expense information at a close distance.
3. Spend Less Than You Earn
Kids need to learn to save part of their income. Help your kids make a list of all their expenses and compare it to their income. Then look at those expenses and have them divide them into wants and needs. Let them choose one or two wants to spend money on now and put the rest on a list for the future. Try using an envelope system. By putting cash into different labeled envelopes, they will have a visual marker for how much they have available for every scenario.
To focus on saving, have your kids choose how much of their income to save. Get a piggy bank or coin jar and have them put money in it every week so they get in the habit of saving.
4. Sacrifice Now For More Later
Investing is an easy enough task that many kids don’t consider. Help your kids understand that by saving a portion of their income now, they could have more in the future. Although this may not be a priority for most people, especially young adults, inform them that this might be the perfect way to help with college expenses. Explain to your children that by investing in a small savings account, they will likely make a profit by simply setting aside those extra monthly dollars.
Budgeting is the foundation of financial success. By having your kids get into good budgeting habits early, you can set them up to do well once they grow up. Visit our budgeting page for information on the different types of monthly expenses and how to help prioritize them.