Teaching Children How to Budget

Parents have an incredible amount of influence on their children. From what clothes they wear to what milk they drink to what religion they choose, children generally follow the example that their parents set for them.

When it comes to budgeting, there are quite a few wrong ways to go about doing it. Many parents are flippant about money in front of their children, and that sends a certain message to the youngsters. Many other parents simply do not address the issue of money and managing money to their children at all, just hoping that their kids will “catch on” and figure it out for themselves. It would seem obvious that this is not a great idea. Neglecting to sit down with your children and talk to them about money and budgeting would be a serious mistake. If you don’t teach your kids about budgeting, who knows what financial mistakes they could make in the future.

Teaching your children now will help to prevent them from making the kind of financial mistakes that are very hard to undo later on down the road. Kids need a gentle but firm example of how to approach and manage money from loving and kind parents who want to help, teach, and guide them. One of the most important things parents can do is to teach by example. Parents cannot expect children to live by certain financial principles if the parents aren’t willing to abide by these principles themselves. Teach them early on that the goal is not to spend your entire paycheck, but to build up a savings.

Begin by showing your children your budget sheet, and how it all works. Show them what each column means and what expenses go under which column. During your teaching moments with your children about money, be sure to be calm and patient with them at all times. No matter what age your children are at, it is important that they know that they are able to learn in a safe and inviting environment. Do not make them afraid to ask questions, or afraid of looking dumb by asking a question. Make sure they know that asking questions is good and is a way to learn, and by no means mean that they are inferior.

It can also be a fun family activity to take a trip to the bank and talk about what happens there. It is up to your discretion as a parent as to how much information or how much detail you want to go into at the bank, but it could be a fun and exciting learning experience for your children. Whatever you might be doing at the bank, like cashing a check or putting money into your savings account, make sure you talk to your children in specifics about what it is you’re doing. This will help them feel included and like they’re more a part of what is going on. Banks often have balloons and candy for youngsters who are in the bank for their parents, so these types of things can help your children feel comfortable inside the bank and associate it with positive emotions.

One of your next stops after the bank can be the grocery store. Show your kids your grocery list and explain to them that you always bring a list to the store with the items that you need; otherwise it is likely that you will buy more than you intended and stray outside your designated budget for food that month. Have your kids participate in going around each aisle and selecting the items that are on the list. Explain to them that there are different brands of each item and that certain prices are better than others. Have them look at the unit prices on the tags under each item and teach them that that is where you can see how much you’re paying for a certain amount of an item. Explain to them that you want to get the most product for the cheapest price.

Bring a calculator to the grocery store and have your kids add up each item that they put in the cart. This can help them visualize and understand the concept of staying within a certain budget. If they’re adding up the items in the cart and the total goes over the amount that you had set aside for groceries, explain to them that sometimes you have to make sacrifices if you can’t afford everything you wanted. Help them put certain things back on the shelf that aren’t absolutely essential. A helpful learning activity that can go along with grocery shopping is helping your children look for coupons in newspapers and magazines before you shop. Explain to them that not all coupons are useful; only if you were going to buy that item already before you saw the coupon will the deal save you money.

Help your children see that they, in their own ways, can help to cut down on the amount of money the family unnecessarily spends. They can turn off lights, computers, and TVs when they leave the room in order to save money on power. Make sure they realize that it’s the end of the world if they don’t do these things, but that it can greatly help your family’s financial situation if they consistently try to be aware of the electronics that they are leaving on. Another way to help your kids learn about money is to give them an allowance.

There are many differing opinions among parents about how allowances should work. Some parents believe that children should only receive an allowance if they’ve done some form of work for it, such as household chores. Other parents think it is best to give their children a small allowance each week, and then leaving it up to each individual child to decide whether to save or spend what they receive. Still, there are other parents who believe that children should get a part-time job as soon as they are old enough, so they can start learning the value of work and not just have money handed to them. And there are still other parents who believe in giving their children however much money they want, because they think that is what will make their children happy ultimately. Obviously, there is no right answer as to how to navigate the allowance situation with your children.

It is up to you as the parent to decide which of these plans will best fit you and your children’s financial needs. With that being said, it is not advised to just give your children money whenever they want it. This kind of behavior greatly increases the chances of your children being spoiled and feeling like they’re entitled to money and possessions that they haven’t worked for. It can seem harmless to do this while your children are still in the house, but as soon as they get out in the real world and realize that people aren’t just going to hand them money when they want it, it can be very difficult and awkward for them to adjust to how the real world works.

Another important thing to remember when teaching your kids how to budget is to give them a place to put their money. Kids love putting things in special places, so this can help saving money fun for them. Kids love the sound of coins plinking into their piggy banks because it gives them a sense of satisfaction. If your children are older, you can buy them clear jars and label them according to what the money is going toward.

Another thing that works great for older children is opening up a savings account for them. Whenever they receive a large amount of money, from birthday presents or perhaps even their part-time job, they can put it in the account so they don’t have cash lying around to tempt them. Be sure to teach them about how interest works, so they can know that they earn money by saving their money. This is an important realization for older children and teenagers to make.

Something to remember throughout all of your money talk with your children is to keep it light and make it fun. Kids will respond so much better to learning when they have a fun activity or game to associate it with. Games like Monopoly and other business and money-related games can help your kids learn about money and budgeting using only cash in a fun and lighthearted way. Another major thing to focus on when teaching your kids about money is the importance of short and long-term goals.

It is important that you emphasize the importance of planning ahead, like for big purchases or even retirement. Talking to them about saving for specific things that they want can help them work towards a goal. When they do eventually earn enough to purchase the item that they wanted, it solidifies in their mind that they are capable of saving and that it is possible to buy the things that they want. Teaching your children how to budget when they are young will help them become more financially wise and well-rounded adults.

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