Why You Need To Teach Your Child How To Budget

Children and budgets might seem like a crazy topic but the earlier you start with your kiddos the better it will be in the long run for them!

Obviously kids are not going to need a full-on budget like adults do, but it is still important to work that in when they get older.

Budget, money, and maintaining a register doesn't get taught in schools anymore. I've seen so many teens and early adults that have no clue how to maintain their money and spend it all by the time they get another paycheck.

Budgeting just means giving your dollars a purpose. This can work with young children up to late teens - early 20's. You'll need to teach your kids how to budget before they get out on their own and have no idea what to do.

I remember watching my mom balance the checkbook every month when she would get the statement in the mail. Yes, I'm that old. 😜 Budgeting and balancing a register is a lot easier now that everyone has online banking, but I always advocate for a written budget and keeping a register -- regardless if you have checks or not.

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Introduce The Concept First

Explain how to budget and what it means

You'll need to give them some definitions before you start with explaining what a budget is. Since kiddos usually don't have a lot of bills to pay, we can keep this fairly simple. Explain the following terms: income, expenses, and budget.

Income is whatever money you bring in. Kids and early teens can think of this as allowance, birthday money, etc. Teens may already have a job, so this will be their paycheck.

Expenses are whatever they need to pay for. Kids and early teens probably don't pay regular bills but I would encourage you to have them start saving and giving. These can be their expenses for now.

Budget is how they spend their money. It's either written down or if they have their own phone, they can use an app.

Play store, or use real money

I think this works very well! When children learn what different coins are in school, sometimes they'll have play money to go with it. Believe it or not, this is what I used when I taught new tellers how to handle money at the bank.

When you use it daily and in "real life" scenarios this helps solidify the information.

You can also use real money, we do this with our kiddos. Whenever we have cash, we have the kids tell us what coins they are and how much it would take to get to a certain amount. I have this kids money workbook if you are looking for more ideas to help your child understand money.

Introduce basic math principles

The other part of learning how to budget when you're small is making sure they understand basic math principles. Now, if you're teaching your older child how to budget, you can just skip this part.

Your child will need to know how to add, subtract, and of course how to identify money.

A Budget Teaches Your Child Essential Life Skills

Financially responsible kids grow up to be financially responsible adults

Teaching children how to budget will give them the ultimate leg up when it comes to managing their money. This goes for allowances, birthday money, and eventually paychecks!

Teaching them when they're younger will give them a good relationship with money. You can teach them to save for purchases rather than impulse buy.

And of course, you need to model good money behavior as well. If your kids see you impulse buying, they will be more apt to do that when they're older.

Kids are sponges, so if they see you and your significant other talking about your budget and saving for items before purchasing they will soak that in and apply it to their life when they are older.

They're less likely to take on debt

If you teach your child to save for big purchases and be money-conscious, they will be less likely to take on debt to pay for things.

Don't get me wrong, they still might want to get that fancy car on payments, but maybe with a little more nurturing and guidance they'll opt for a cheaper car that they can pay for out right or at least have low payments.

My husband and I both saved all through school to pay for our vehicles. Granted, we both still had to take out a small loan to cover the rest, but how awesome is that! Having a vehicle that is mostly paid for at such a young age.

They will be more money-conscious

As I mentioned above, if your kids see you pondering whether or not to buy that new shiny thing, they will most likely follow in your footsteps.

My husband and I involve our kids in our budget. Not to a crazy extent or anything, but they know that we have a budget and how much we spend on groceries, fun stuff, etc. They also know that for birthdays and Christmas there is a limit to what we spend.

We use cash envelopes for items that are easy for us to go over-budget on. We also use these for birthdays and Christmas!

Hire them young

Now don't get me wrong, I'm not advocating for child labor!

Assign them extra chores to earn money. If they're old enough to mow lawns or babysit, offer that to family and friends.

Then show them how to budget their income into what they are spending or saving for.

Teach them the value of a dollar

Teach them the value of a dollar. If they want that new toy or a bike, explain how much money it will take to get there.

My oldest daughter left her bicycle out constantly this winter and it ended up getting buried in snow for awhile after a big storm. Let me tell you that thing has seen better days! We bought her one bike, we aren't going to buy her another especially due to not taking care of it! She is working on this now and is about half-way there! I'm so proud of her.

And before you get all upset with me YES we told her multiple times to make sure it was up. YES we made sure to tell her that it will get ruined if left out. Ok, I think I covered all my bases.

In my experience, when they know how much things cost and have to pay for it with their own money, they are more apt to take care of it.

Managing a budget

Your child managing their own budget teaches them critical thinking and problem-solving skills. It can fuel their desire to find other ways to earn money so they can attain their financial goals.

They will need to make decisions, and possibly between two things that they really want! Or maybe this will get them thinking about things they need vs. things they want.

Learn from their mistakes

Adults do it, so of course the kiddos will make mistakes, too! That's okay, that's why we're teaching them how to create a budget while they're young so they learn from their mistakes and can course correct on their own when they're older.

Instead of them thinking that they failed, we can help them understand how they went wrong and how to learn from it. Maybe this will help you as well in your budget journey!

Fun Games to Teach Your Child How To Budget

Monopoly

My kids love Monopoly! We don't usually play the full version since it's so long, but they learn how to manage their money that they get in the beginning to get the best properties. They also have to manage any money they pay out to other players, and money they get in from players.

This one has been around forever and really a fun game. There are so many versions now, there is Monopoly Junior, Monopoly Go, and Monopoly Deal. We have the full version of Monopoly and Monopoly Deal, which is a card game version of Monopoly!

Life

Oh my gosh, this one is so fun, too! We like to play this one a little more than Monopoly since it's a little shorter! Still a great choice to teach kids about budgeting and saving money.

There are so many games out there but these are the two that I have and play fairly often with my kids.

Grocery Store Budgeting

Whenever I go grocery shopping, I usually have my three kids with me, so this is a learning opportunity for them on how to stick to a budget as well as figuring out what groceries actually cost less than others. This is perfect, because it gets in some schooling (we homeschool) and it gets in some budgeting!

I also explain how important it is to stick to a list because this can completely blow the budget!

Budgeting Books For Kids

We bought Dave Ramsey's Junior Books to start teaching our children how to budget and save. They are super fun and also stress the importance of hard work to get what you want. They are a well-rounded book and explores Junior's impulses as well and how he learns from them.

And of course, don't forget that I created my own worksheet for kids that will teach them how to identify money and then be on their way to budgeting their money!

Bottom line, make sure you are starting the financial literacy/budgeting talk with your kids early. The earlier they learn the better off they will be when they are out on their own whether in college or when it comes to raising their own family.

Teaching kids how to budget as early as possible will foster responsible adults, encourage good money-behavior, and prevent debt problems in the future.

More articles on budgeting:

How To Completely Slay at Financial Literacy

How To Use Cash Envelopes and Get Control of Your Spending

Creating a Budget for Beginners