Explaining budgeting to kids - how to make sure your kids are wise about money

Even if you don’t want to admit it, money makes the world go round and learning about money from a young age can help to make you money-smart in the future. If you’ve got kids it will be worthwhile sitting them down to discuss the finer points of money to them, especially budgeting, as this is one thing that they’ll be able to use in later life to
ward off money troubles.

So, here are a few ways you can teach your kids all about budgeting:

1)      The pocket money method

If you give your kids pocket money you should ask them to pick out a toy or some other item that they’d like you to buy for them. Then, once they’ve made their decision, tell them that they’ll be buying the toy, but in a couple of weeks. Explain that, for the next few weeks, you’d like them to save up their pocket money so that they can buy the toy.

You can then design a colourful savings plan with your child – get some paper, crayons, pencils and felt tips and draw a calendar with your child that they can then write their savings dates in. They can draw pictures on it and anything else they’d like – the real message here is when they’ll be putting money in their piggy bank.

Give your child the choice of saving their pocket money when you give it to them – they need to learn that budgeting is something that needs to be done consciously. Every week you should take all of the money out of their piggy bank and count it with them, and then mark the amount on the calendar they’ve made. Eventually they’ll reach their goal and can be treated with the toy they’ve been after!

2)      The open and honest solution

Being completely open and honest with your kids is one of the best ways to teach them about budgeting. If you explain how your household budget works they’ll be able to get a much clearer picture of it, as they’ll be working from a real example. Break down all of the household expenses with them and show them how much everything costs – it’ll definitely be an eye opener for them and will show them just how much it costs to run a household!

3)      The work-money explanation

For your child to understand budgeting fully they’ll first need to get to grips with the idea of working to earn money in the first place. Budgeting is pretty much impossible without some form of income, so you should give them a chance to earn some money so that you can then go through budgeting with them.

Draw up a list of chores they can complete, along with the amount they can earn by doing them. They can then complete the tasks within a set timeframe to earn money. After this, sit them down and calculate how much they’ve earned and get them to write a list of what they’d like so spend their money on. Then, all you need to do is go through the calculations with them to help them to figure out how much of what they want can actually be bought and if they need to start saving any money to buy a more expensive item in the future.

How would you teach your kids about budgeting?

Janice Lincoln is a freelance writer who enjoys writing articles about financial advice for all of the family, covering topics from wageday cash loans, fiscal responsibility, all the way to organisational techniques such as spreadsheet budgeting and statistics analysing.