Teaching Kids About Money

How to Teach a Kids Budget

Budgeting for kids is something as  parents we should be obligated to teach correctly and effectively. If we can teach a kids budget starting from an early age, we are setting them up for greater success in their financial lives as they reach adulthood. Now how does a children budget differentiate from a normal budget in our family homes? Well, essentially budgeting for children is starting off giving an allowance to them. Now most parents these days will think that this is all they have to do and that it will automatically teach children budget techniques.

If you are not careful, kids will spend their allowances without any focus on kids budgeting. You will soon see that they will only spend on small items such as marbles, candy or comic books. They have no vision to save money.  Now budgeting for kids should be teaching them how to distribute their pocket money to savings and expenses, and ultimately being in control over their finances.

As a fundamental rule for a kids budget, I will always highly recommend that your child saves at least ten per cent of their allowance.  What you can do is teach them that by saving this over a period of 10 weeks, they will be able to buy the latest video game or Lego toy. Obviously this is when they are young kids.

Below are two areas I have divided for budgeting for kids – a kids budget (up to 10 years old) and a teenage budget (11-18 years old).

Kids Budget (Up to 10 years old)

When your children are very young, an allowance is given to them. Now you should initially monitor what your kids do with this pocket money. After a few weeks and assessing what they are using their money for, start implementing a children budget plan. Look at what your children our buying. Then draw on a chart with your child what they should do with their money.  Ask them for input as well.

For example, you could start a kids budgeting plan with 30% saving, 30% on food, 30% on toys and 10% on giving to charity. Obviously this is between you and your child so fit it accordingly to them. With savings, give them goals. It could be saving towards a new bike that could take 20 weeks to save for. Teach them if they want the bike earlier, they could put more money into their savings, and spend less on food expenses for example. Now food is just candy and chips for example, of course you as the parent is the primary provider for all food and shelter.

Another children budget tip is to reward them with good budgeting progress.  You could match their savings, so if they reach $100 in their savings account and decide to keep on saving for longer term goals then match their savings by depositing another $100 into their account.

Teenage Budget (11-18 years old)

Budgeting for kids who are teenagers is going to be vastly different to when they were younger. They will have different needs and wants and will most likely have a larger allowance from their parents. It is essential here that budgeting for teenagers should be well thought out and planned to install good money habits as they reach childhood.
They will start to think about buying a car, saving up for college or even buying a house soon. A teenage budget will need to be a little bit stricter so they can attain their goals later on.

Communicate about Kids Budgeting

At the end of the day, make sure you communicate consistently with your child in regards to this topic. Make yourself open to what your kids want to ask you. Have weekly discussions on kids budgeting and you will ensure that your children will have potentially a greater financial mindset later on in their adult lives.