Welcome back to how to raise a money savvy kid! This week, we’re going to talk about teaching your child to budget. Now, if you’ve been here before then you know that I’m a huge fan of making a budget. I think it’s incredibly important. Whether it’s creating a family budget or creating a get out of debt budget, budgeting really helps me to keep my spending in check. Especially with us being a one income family (for now), sometimes we really do have to get creative when it comes to stretching that weekly paycheck.
So is it possible to teach kids how to budget? Of course it is! And by learning this life skill now, you’re setting them up for financial success in the future.
Most of us don’t learn how to budget until we’re older, but by teaching your child how to budget now, you could be setting them up for financial success in the future.
Teaching Your Child to Budget
Talk about Your Household Budget
The very first step to teach your child about the concept of a budget is to involve them in discussions about your own budget. Children pay attention to the actions of the people around them. It’s ineffective to talk about a budget but to not actually keep one yourself. So, if you don’t create a monthly budget, now is the time to be a good example.
And if you do, great.
Now is the time to involve your child in the budget discussions. Show them your budget. Talk about how much you make and how much goes to the various expenses that they might take for granted, like utilities and food. Also show them the savings column in your budget so that they know you practice what you preach.
Talk about what you do when you have an excess each month and what you do when you spend more than you’ve budgeted. Make the family budget a family conversation. Your child will not only learn good budgeting habits themselves, they’ll also have a better understanding about your own family finances.
If your child is old enough, involve them in planning the family budget.
Give Them Money and Take Them Shopping
The next step to teach your child about budgeting is to give them money and to take them shopping. There are many different ways that you can approach this. However, it’s important that you’re prepared to manage the consequences.
For example if you give your junior high school child $200 to go school shopping there is a very good chance they’re going to mess up and buy one shirt and one pair of pants. The money is gone and now your child is left wearing the same shirt and pants for the school year. Money lessons are often learned by making mistakes.
Be sure that you are willing to follow through on the consequences. If you go out and buy your child more clothing, they don’t learn the lesson about budgeting their money and trying to purchase less expensive items so their money stretches further.
You can make it a game at the supermarket, too. Give them $20 for example, and ask them to find the items on a list and to stay in the budget. These small experiences help your child begin to realize that they have control over their financial decisions and that there are consequences to spending more than they have.
Help Them Create a Budget
When your child is old enough, and perhaps has some money coming in, you can help them create a budget for themselves. The budget might contain expenses like gas for the car, money for going out with friends, and a clothing budget. Creating the budget and sticking to it are two different things. Help your child create a plan to stick to their budget. It might require them to keep their receipts or only take out a certain amount of cash each week.
Budgeting is a skill. The earlier your child begins learning and practicing this skill, the better. They’ll be able to go out into the world confident that they are fully capable of managing their finances.
If your child is having issues understanding why they should budget, they might need some guidance in regards to creating a budget without struggling.
Teaching your child to budget, also helps them realize the value of money.
How old were you when you created your first budget? Do you think learning how to create a budget as a child would have helped?