How to teach your kids about budgeting?
Photo by Karolina Grabowska
Many of us leave school and are thrust into the world with little idea about money. It’s common to leave school, move out, and get carried away with spending with our first paychecks because we’re excited to have money for the first time and have no idea how much we need for things like bills and food. It’s common for young people to get into debt and financial difficulties simply because they don’t know how to budget or understand the value of money. If you have children, teaching them about money and its value and how to budget effectively can be one of the best ways to help them in later life. Here are eight great ways to teach kids about budgeting.
Give them pocket money
When your children are very young, you might not think they need pocket money because they are always with you. But then, when they hit their teens and have money for the first time, they go out and spend it all on junk, with no concept of saving for something important.
Giving even young children pocket money helps them to build an understanding of managing their own money. While cash is still important, many young people get caught out with digital spending, which will be more common in their lives, so consider a bank account and card too.
Encourage them to set a savings goal
Most kids start out spending their money as soon as they’ve got it. To teach them about budgeting, you need to also teach them about saving. Encourage them to set a goal, like buying a computer game, that will take them time to save for, and talk about setting some aside while leaving money to spend on smaller things each week or month.
Let them earn money
Children also need to understand that money needs to be earned and that it won’t always be given. Allow them to earn small amounts extra with chores around the house.
Let them make mistakes
If you’ve spoken about budgeting and saving, and your child has a goal but wants to spend a lot of their money on something spontaneous, and you feel it’s a mistake, don’t stop them. Let them learn from their mistake and adjust their goal and budget if necessary. We all make financial errors sometimes, and they need to know how to recover.
Show them your household budget
Family budgets are more complex than a child’s pocket money, and young children might find income and bills hard to understand. But as your children get older, start showing them your budgets and how they change if you add in luxuries like holidays or spending sprees. This is also a great chance to discuss the difference between “want” and “need” and how sometimes the wants must be sacrificed.
Take them shopping
Taking your children shopping and showing them things like special offers and price per 100g is a fantastic way to help them understand where money goes and how to make sensible decisions.
Talk about online shopping
Today’s young people will do a lot of their shopping online, which can be dangerous. Remember to teach them about online shopping, the risks of overspending and scams, and the best ways to get deals on everything from automotive supplies to home goods.
Start young
Even very young children can play shopping games and roleplay, which will give them a good basis to learn from in the future.
Teaching children about money and budgeting while they are young and expanding their knowledge as they get older is a fantastic way to protect them from costly mistakes in the future.