Teaching Children To Budget

A great thing to introduce to children at a young age is the concept of budgeting and money management. If you teach these kinds of skills to children when they’re young they can use them all through life and avoid any financial mishaps early on.

The easiest way you can introduce young children into the concept of money is to simply teach the the ideas of cost and worth. By helping children to understand that things in our society are given an intrinsic value according to how much people view their worth to be we assign them a cost. It seems like a complicated concept at first but children can easily pick up on it when you relate it to something in their world. A simple way to do those is to help children understand the value of certain things they encounter on a daily basis, like their toys or certain privileges.

A great way that my mom taught us the value of certain things was to give us a weekly allowance that we could spend on various activities or privileges. For example - we each got an hour of time to ourselves on my mom’s laptop every day. If we wanted an extra hour we could spend some of our allowance on it and thereby “purchase” more time. We could also buy extra time watching tv, using certain toys that we all shared, or being able to choose what chore we wanted to do that night first. At first this system was applied just using play money (like the kind that comes with various board games) but once we got older our allowance became real money and we got to interact with the rest of the world when it came to spending our money.

By starting out your kids with a small allowance (especially if you begin with play money when they’re young) you can teach them that certain things cost a pre-determined amount and that our society has a value/money system that allows us to pay for those things. Once they’re accustomed to the way that we spend and earn money you can begin to teach them to save and budget their allowance for certain things.

Often one of the best ways to teach this is to simply let your child experience wanting something they don’t have enough in their allowance to pay for. When they’re young and the experience is limited and harmless it’s an effective lesson that doesn’t cause any trouble for them. You simply sit them down, explain how much they have in their allowance and how much the item is that they want. Then you show them that they can do a couple different things if they really want to have that item. They can either save their allowance until they have enough money to buy that specific item or they can find out how to earn more money until they have enough for their purchase.

Ideally the answer you want to suggest here (and the one your child will most likely lean towards) is that of making more money to buy the item they want. This instills in your child a sense that they have control of their financial situation and don’t simply have to wait around for money to show up in their laps before they can have what they want.

This also allows your child to begin to have a grasp of what it means to earn their money instead of just having it given to them. Most parents begin this by simply having their children do some extra household chores to earn some cash but it can also take some other forms.

If your child has a talent or a skill they’ve been developing (perhaps an artistic or musical skill - though these are just the most common forms) you can show them how to put that to use to earn some money. Many children will turn to the basic lemonade stand and that’s a great starting point. Other will put on “shows” such as puppet shows, dance concerts, or musical performances for their neighbors and friends and often have a little jar out to collect spare change in as a reward for their efforts. Bake sales are also a popular idea. If your family is doing a garage sale you can have your child set up their own little table and earn all the profits from their own sales - it helps to have an adult close by for counting change and safety reasons though.

Once your child has learned what it takes to earn and save enough for their purchase then they get to experience the reward of being able to buy what they want. This is also a useful time to teach them about comparison shopping, finding the best price, and making sure that they don’t waste their money.

Throughout this process it’s also wise to teach your child to save a little money for themselves and to budget carefully with their money. This can be effectively taught by giving your child an allowance at the beginning of the week and explaining to them that this allowance is for not only any fun purchases they might want to make but also for any extra snacks they might want to buy while they’re at school. This way they have more than one use for their money to manage. If they want to be able to buy a drink or a treat at school during lunch they have to save their money. If they spend all their money in advance they’ll either have to bring things from home to eat or they’ll go without. Your child will quickly learn that if they spend all their money at the start of the week they wont have anything to get them through the rest of the week or to spend on fun things outside of school. This way they’ll be able to learn to manage different spending options, save money, and budget their money over a specified period of time.

By teaching your child these concepts while they’re still growing they have a chance to learn their lessons about money and finance in a safe structured environment before they can do any real damage to their financial situation. It’s a much better alternative than having their first experiences with budgeting be when they’re first going out on their own into college and it can save them a lot of financial hardship if you take the time to help them understand these concepts when they’re young.

Children of any age can learn about money and budgeting if you just get creative and put the lessons in terms that they’ll understand. Take the time to teach your kids these lessons early on and they’ll benefit them for the rest of their life.