Teaching Kids About Budgeting – On the Right Path
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We all know how hard adulting is, and one of the challenges of adulthood is smart money management. It’s not that we can’t learn how to manage our finances correctly. It’s simply how nuanced it is that makes it so challenging. Adding our jobs as parents into the mix takes this challenge to a whole new level. However, teaching kids about budgeting can help them make better financial choices and feel more confident entering adulthood, so they can potentially avoid some of the struggles we’ve all felt in our adulthood.
Whether you’ve got money mastered or barely hanging on by a thread, we all have financial knowledge or experience worth sharing – and sharing it with our children may be one of the best gifts we can give them for a bright financial future. Teaching them financial literacy and setting financial goals helps prepare them for the real world when they have to make decisions on their own.
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How to Teach Kids About Budgeting
There’s so much when it comes to budgeting it’s easy to get overwhelmed. From savings, investing, giving, and budgeting, where do you begin? Here are several ideas for making money talk more engaging and fun so smart money management principles stick with them for life.
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Start the conversation with jars
Setting up money jars is a fantastic way to make budgeting real and exciting for kids. Start by getting three clear jars (or any containers, such as a piggy bank) and labeling them as "Save," "Spend," and "Share." When your child receives their allowance, money as a gift, or a little from the tooth fairy, you can guide them into dividing it between the three jars.
You can take it further by explaining the Save jar is for saving money for bigger things they want in the future, like a toy, a video game, a special outing, or an experience. The Spend jar is for everyday expenses or small treats they may want to buy. You can even help them set a limit to this, such as $15 for each use. Finally, the Share jar is for giving back to others, like donating to a charity or helping someone in need. These three jars teach them the value of setting priorities and budgeting for different purposes.
Discuss wants vs. needs
Before they make too many decisions with money, it helps to discuss the difference between a want and a need. Needs are essential for survival and well-being, like food, clothing, and shelter, while wants are things we would like to have but can live without, such as subscriptions, video games, and the latest makeup. When we have conversations about our needs and wants, it helps them prioritize by considering what truly matters to them and learning the importance of delayed gratification.
Include them in the money math
Why not turn shopping trips into interactive budgeting and money lessons? When heading to the store, give your child a set amount of money for spending and encourage them to stick to it. As you shop together, compare the prices of different items and discuss how to get the best value for your money. For instance, ask them to choose between two toys that cost the same or help them calculate the total cost of their favorite snacks. This exercise not only reinforces math skills, it also instills a sense of financial awareness and responsibility.
Save, earn, repeat
You can teach your kids money doesn’t actually grow on trees, and instead, it's earned through hard work and responsibility. Encourage them to do age-appropriate chores around the house, like tidying up their room, helping with dishes, or walking the dog. You can create a chore chart and assign a small monetary value to each task. As they complete their chores, they'll also earn money they can put into their Save jar. This process not only teaches them the value of earning money but also the importance of working towards their goals patiently.
I’ve recently incorporated this into my own children’s financial habits, and I was shocked at how much it encouraged them to make a list and complete a task. Plus, I gave them “bonus” opportunities for a few extra items above and beyond their initial list – which they gladly completed.
Initiate fun budget challenges
Admittedly, budgeting isn’t what most kids consider a fun time. But we can turn budgeting into an enjoyable family activity with enough creativity. Challenge your kids to plan a day out or a special event with a specific budget. Let them decide what activities to include, where to go, and what snacks to enjoy — all while staying within the allocated budget.
Creating a fun challenge allows them to exercise their creativity, critical thinking, and problem-solving skills. It also shows them that having a budget doesn't mean sacrificing fun, but rather, it’s about making smart choices to make the most of what you have.
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
Be money role models
We all know children often mimic their parents' behaviors (yes, including ones we’d rather they forget), which also applies to money habits. You can be open and honest about your finances in an age-appropriate manner, which helps your kids understand money is a part of everyday life.
Share your experiences with budgeting, saving, and spending wisely, such as when grocery shopping and choosing generic brands versus name brands so your money can stretch further. Discuss how you decide to make purchases and the trade-offs you consider. Being transparent about money matters, help them develop a healthy and informed relationship with money from an early age.
Let them make mistakes
Budgeting is a life skill that takes time to develop, and mistakes are a natural part of the learning process. I think most of us can agree we’ve all made our own share of money mistakes and have lived to tell the tale. If your child overspends or regrets a purchase, instead of making them feel bad or ashamed, use it as a chance to have an open and supportive conversation.
Discuss what went wrong, why it happened, and what they can do differently next time. It’s a chance to empower them to learn from their mistakes and make better choices in the future. You can even use it to share a similar mistake (and if you don’t have a story, you likely know someone who has) and what the result was.
Match savings contributions
Money is a motivator for most kids. Consider using a matching program to motivate your kids to put even more into their savings accounts. You can add a percentage as a bonus for every dollar they put into their Save jar. For example, if they save $5, you could match it with an extra $2. This strategy not only makes saving more rewarding for them, it also demonstrates the benefits of planning and introduces the concept of interest. It can be an effective way to encourage consistent saving habits.
Budgeting for family events
Involve your kids in the budgeting process for family outings or events. Whether planning a day at the zoo, a weekend getaway, or a birthday party, set a budget together as a family. Let your child contribute ideas on what to do and where to go, considering their interests and preferences. You can even brainstorm ways to stay within the budget, like packing a picnic instead of eating out or finding free or low-cost activities. Collaborating instead of just telling them what’s happening shows them how budgeting is a team effort and their input matters.
Setting big goals
You can help your kids set long-term financial goals beyond short-term purchases. Whether it's saving for a big-ticket item they want, like a new Xbox, or starting a college fund, encourage them to dream big and think about their future.
You can help them break down these goals into smaller, achievable milestones. For example, if they want to save $100 for the latest name-brand athleisure leggings, help them set $10 or $20 mini-goals. Then you can celebrate their progress and achievements as they reach each milestone, which gives them both a sense of accomplishment and motivation to continue budgeting wisely.
Open a simple checking account
For your older kids and teens, a simple checking (or savings) account is a great way to teach them how to control their money. There are plenty of options geared towards teens' use, but enough control with parents. The Greenlight card is a popular option, but you can do this with almost any debit card. Plus, it’s a convenient way for them to keep track of the money they earn from a part-time or summer job.
When they have their own bank account, they can monitor their money and keep track of their savings or long-term financial goals, but still under your protection so you can guide their decision-making.
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
The bottom line
Whether preschoolers, teens, or anyone in between, teaching our children about budgeting takes special effort. Think back to how much – or little – financial knowledge you had and the impact it made on how you treat your money now as an adult. If you want your kids to appreciate the value of money and its role in our personal finance and everyday lives, then it’s worth starting these valuable money lessons now.
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Writer
Sara Coleman is a former corporate gal turned creative entrepreneur. She began writing professionally several years ago and now contributes to multiple websites, blogs, and magazines. She’s also an avid reader and can’t resist a great historical fiction novel. Sara holds a BA in journalism from the University of Georgia and can be found supporting her Bulldogs every chance she has. She resides in Charlotte, North Carolina, with her wonderfully supportive husband and three children. When she’s not ushering her kids to sports and dance lessons, she can be found creating content for her own website, TheProperPen.com.
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