We all want our kids to grow up to be financially savvy adults. And one of the best things we can do to give them a great head start is to teach kids to build a budget – and teach kids about money in general.
A budget is one of the greatest money tools available to everyone. Budgeting for kids is a skill that will serve your kids throughout their entire life. And relax, Momand dad. You may not be met with initial excitement at the suggestion of building a budget. But, if you can help your child understand that by budgeting, they’ll be able to potentially make and save more money in the long run, you’ll be doing great.
Help them build excellent money habits now for lifelong success. We’re going to help you teach kids to build a budget. If you have a teen, check out this article specific to teen budgeting.
Let’s dig in and learn more about budgeting for kids.
You’ll be setting them up to make smart fnancial decisions for life!
1. Help Kids Understand How Much They Have To Work With
Let’s get into the specifcs. As you’d do with your own household budget, you’ll want to help your kids understand how much money they’re going to have in total to spend.
Do they get a weekly allowance? Or are they a little older and have a part time job? Either way, begin by writing down the maximum amount of money they’ll have to spend weekly and monthly. This sets the stage. They cannot go over thisamount, no matter what. And it’s one of the major components of budgeting for kids.
2. Set Goals
Focus on your kids’ goals. This is one of the most exciting parts of personal fnance for kids.
Make sure to decipher between their wants and needs. Teach them the difference, and show them with examples. They are two very different categories.
Help them understand the difference between short-term goals and long-term goals. Even kids can have financial goals, big and small! Whether they want to buy some video games, or whether they want to earn some college savings, a budget for kids can help.
Your kids may want a new toy or game, but do they need it? Is there something that doesn’t cost a lot that they can buy now, or do they want a higher priced item that requires them to wait it out until they earn some money?
Post your child’s goals somewhere visible, so it serves as a reminder when they may want to give into their impulses for instant gratifcation along the way.
Setting goals helps you – and them – work backwards to understand how they’d like to divide their earnings between the below sections.
3. Then, Move Onto Spending (Because kids fnd this the funnest part!)
Have your child list all of the things they want. Then, have them go back to their maximum amount of weekly or monthly earnings, and understand how long it will take them to earn the things they want. They may be a little disappointed if they can’t afford everything on their list – but that also helps you teach them some valuable life lessons (such as putting off instant gratifcation).
Give them a realistic idea of what percent of their budget they could allocate to the Spending category, and write this down in a Budget Worksheet (we’ve linked our handy version). And you can take advantage of some of the money management apps we’ve recommended before.
Helpful Tip About Budgeting for Kids: Show, don’t tell. There are so many everyday experiences that we can use as a teachable moment. Give your kid $5 (or whatever extra money you have in your pocket) and take them on your next Target Run. Let them decide how to spend it, and let them pay for whatever they choose. The only rule is that they can’t go over the $5 limit, sales tax included. See what happens, and use this interaction to spark enlightening conversation with your child! Did they make smart spending decisions, or could they maybe do better next time? Have that important money conversation!
4. Next, Teach Kids About Saving
While saving can initially feel super boring to kids – and hey, even to us adults sometimes – it gets really exciting when you see your money start to add up into something signifcant. This is the area where they really learn about long-term success!
Saving can help them get excited about earning money toward one of their big ticket items, or maybe they want to help pay for something in the future, or begin to invest – or maybe they want to donate to a charity that is special to them.
Help them set a savings goal and record milestones ahead of time – and help them plan. After all, failing to plan is planning to fail, as they say. Reward them along the way for their achievements, and acknowledge how great they are at putting off instant gratifcation toward their longterm goals and fnancial health!
Show them that by saving a little today, they can reap much more in the long term!
Helpful Savings Tip: Plan, and then measure your child’s progress along the way toward their savings goal. Big goals can seem too lofty and unreachable to kids. Revisiting their progress again and again helps to get them excited and want to continue working toward their goals.
5. Finally, Teach Kids About Investing and Giving
Giving
Kids love to share. Well, sometimes they love to share. But what I know about kids for sure is that they love helping others. Kids are empathetic, and often feel sad and want to help when they know someone isn’t doing well, or when they fnally learn about all the things that plague humanity (like homelessness, illnesses, and more) as they grow.
Leave a section on your child’s budget for giving, and give them suggestions of ways to give. Eventually, your child may even decide to start a charitable foundation! You never know.
Investing
There are a lot of programs, books, and educational tools available these days to help us teach kids about investing. Read our articles on teaching your kids about the stock market and check out some investing books for kids.
Key Takeaways About Budgeting For Kids
It’s incredibly important to have educational money conversations with your kids. It’s one of those must-do’s in being responsible adults. Teaching kids to build a budget is something that will beneft them for their lifetime.
Kids who are taught about budgeting tips and fnancial smarts from a young age will be far more ready than their peers for the real world. Set aside a few minutes each week to work with them on their budget and budgeting skills, and watch this time help you bond, while paying dividends (literally) down the road and elevating their fnancial literacy. Pretty soon, they’re little piggy bank will be overfowing!
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