Learn How To Budget: Kids Edition!
While schools instill in children unique knowledge that well outweighs those of most adults, children frequently miss a crucial education in financial literacy and fundamental money management skills, such as how to budget.
According to experts, those who develop a strong understanding of budgeting early in life have a better chance of achieving financial success as adults. Learning how to create a budget is crucial because it may help your kids save money for the future, build an emergency fund, and keep them from going into debt.
Given that, it is up to the parents to teach their kids the importance of budgeting. As with other skills, budgeting requires practice and takes a lot of time. Here, we'll explain how you can guide your kids to make spending and saving plans to accomplish their goals and maintain their financial stability before they enter the harsh reality of adulthood.
The Importance of Budgeting for Kids
The lessons one learns while growing up in their household are a crucial part of financial education. Recent studies have shown that parents are the primary source of children's financial knowledge and values as they enter adolescence and adulthood.
A Journal of Consumer Affairs study found that kids are developmentally capable of saving by the time they are 5 or 6 years old. However, the sooner they begin learning the fundamentals of ideas like budgeting and saving, the better.
Overspending is one of the most typical reasons for adult financial problems. The good news is: you can prepare children for the economic realities of adulthood by teaching them about money fundamentals and budgeting.
Strategies Kids Can Learn To Create a Budget
These are some great ideas for helping young ones learn how important a budget is and how to achieve one.
Define needs vs. wants
For your child to prioritize how they spend their money, you should help them distinguish between what they want and what they need.
The founder of Super Money Kids, Courtney Hale, emphasized that your child must understand that needs come before wants. Ruiz proposes making the comparison between toys and clothing as needs and wants. You can explain to your child why it's important to dress warmly and protect themselves from the elements because they seek things for fun even though they don't need them to survive.
Setting budget goals
Encourage your kid to choose a financial goal, such as purchasing a new video game or visiting an amusement park. After that, assist them in making a chart to record their earnings. Allow them to physically put their money into a piggy bank each time they earn it, then keep track of where their money goes and how much money there is, and update it regularly. Together, come up with a strategy for how much they should make daily or weekly to reach their objective.
Tell your child their goals and income will change as they age. They will need to keep track of their requirements, wants, and priorities, which may differ from one another. For instance, children might lose their piggy bank or receive more money from family members for their birthday. Good objectives must consider the child's age and have appropriate deadlines. According to Hale, the goal ought to be reached by an elementary-aged pupil in less than a month.
Try to match the child's interests with the financial objectives you use to teach budgeting. An excellent aim of a child who enjoys art, for instance, to save $20 in two weeks for a 100-piece art kit.
Elaborate budgeting process
Focusing on discussing income is the first step in developing a budget with your child. You can use your income or a made-up example of money to explain how it works to younger children, as they often don't have a regular source of revenue. You might go over your expenses with them and demonstrate how you deduct required expenses from your income to see how much money is left over for savings and other purposes.
Depending on their age, kids might receive money from the Tooth Fairy, gifts from family members, their allowance, part-time employment, or gifts from adults.
After that, let your child deduct their outgoings from their incomings. Congratulate your child and let them know they have enough money to cover their necessities and wants if the result is favorable. If the answer is negative, explain that they will need to increase their income or reduce spending, such as sneaking health into your kid's diet on a budget, to achieve their goals.
How Should a Kid’s Budget Plan Look Like?
Your child can state their goal, when they would want to reach it, how much money they earn in that time, how much they will save, and the cost of the goal in a simple three-column form with the phrases "goal, savings, and cost." They can then decide whether they are on pace to accomplish their goal or what adjustments they need to make.
Budgeting tools you can utilize:
- Notebook - Don't discount the convenience and pleasure of a vintage notepad that fits into a purse or backpack. Give your child the freedom to select a design they want, a fancy pen, and colorful stickers to aid them in keeping track of their spending and budget.
- Budgeting apps - Mydoh is a given, of course. However, many money management apps are made exclusively for children and teenagers. The best part is that most of them are free.
- Spreadsheet templates - If you type "budgeting worksheets for kids" into Google, you'll find a ton of vibrant, printable spreadsheets that your child may use on a computer or smartphone. With one of these, tech-savvy children will have no issue managing their money.
What Age Is Ideal for Teaching Children About Budgeting?
Children can learn the fundamentals of budgeting at a young age. The ideal age at which a youngster is most responsive will vary depending on the child. While Kari Lorz, a certified financial educator, agrees that children should learn about money at a young age, she suggests that the optimal age to discuss budgeting in greater detail is around eight years old.
While teaching kids about budgeting requires time, effort, and ingenuity, it is unquestionably rewarding. Your child will be able to develop other good financial habits and steer clear of problems like overspending and debt if they know how to make and keep to a budget. It may even pave the way for their future success.