If you’re finding yourself overwhelmed by your child’s constant requests, you’re not alone. Teaching kids about budgeting might seem intimidating at first, but with the right information and tips, you can ensure that your kids will learn how to be responsible with their money from an early age. Keep reading for five tips on teaching your kids about budgeting.
1) Help Them Set Goals
You can help your kids set financial goals by getting them involved in the budgeting process. Help them understand what they want to save for and how much it will cost. Then, you can work together to figure out how much they need to save each month to reach their goal. You can also encourage them to start putting money into a piggy bank or savings account so they can start habitually saving.
Once your kids understand how budgeting works, you can help them develop good habits. Help them set savings goals for each month and encourage them to save a portion of their allowance or earnings from part-time jobs. A great way to help reinforce good money management habits is to go shopping together and have your kids give you a dollar for every dollar they spend over their allotted budget. They’ll quickly learn that every time they buy something, it costs them in more ways than one! When they realize that even minor purchases require budgeting, they’ll be better prepared to stick with a budget when they grow up.
2) Find Ways to Create Income
One way to teach your kids about budgeting is to help them find ways to create income. A piggy bank is a great way to start this conversation. You can explain that every time they put money in their piggy bank, they are saving up for something special. As they save more money, they will be able to buy bigger and better things.
To teach your kids about budgeting, you can help them create ways to make extra money. This can be done in a variety of ways, including doing chores around the house or having them get a job after school or on weekends. Another option is to start a business and begin saving some of their profits in a different bank account so they have more money for things they need. In time, you can expand these conversations into more complex situations such as credit cards and car loans. There are many additional tips for teaching your kids about budgeting that might work best for your family. However, getting started by helping them understand how to save money is an excellent way to begin building smart financial habits for years to come.
3) Work Together to Save Money
A great way to teach your kids about budgeting is to work together as a family to save money. Explain to them why it’s important to save and set a goal for how much you’d like to save each month. Then, have everyone in the family contribute by cutting back on unnecessary spending and putting that money into the savings account. Once you reach your goal, celebrate together!
Another good way to help your kids learn about budgeting is to open up a savings account for them. Start small, with just $20 or $50 in it, and let them watch as you deposit money over time. You can even add a fun reward when they reach certain milestones. It’s also a good idea to teach them how interest works early on so they understand why their savings grow over time. This will encourage them to be more diligent in managing their account and spending less than they make.
4) Put Savings in Place for Special Purchases
You can’t teach your kids about budgeting if you don’t have a savings plan in place for your family. Start by opening up a savings account that is just for the family. Then, each time you get paid, put some money into this account. Explain to your kids that this money is for special purchases like a new bike or a trip to the amusement park. When the time comes to make these purchases, you’ll have the money saved up and won’t have to put it on a credit card.
Teach your kids that saving for special purchases takes patience and practice. The next time you buy a new toy, like a board game or a stuffed animal, save that item until you have enough to pay for it in cash. Then show your kids how much money they’ve saved up so far, and tell them how much more they need to go toward their goal. When they eventually reach it, give them a big treat with their savings! Or if your family is looking for something specific, like new bicycles or DVDs for everyone, let them pick out what items are most important to them as long as you still have some wiggle room in your budget left over.
5) Keep Track of Spending
One of the best ways to teach your kids about budgeting is to have them help you keep track of spending. This could involve sitting down together at the end of each day or week and going over what was spent and where. You can also set up a budget tracking system online or in a spreadsheet that they can help update. As they see where money is being spent, they’ll start to get a better understanding of how to budget and save.
Tracking spending is also helpful for your own budget. It’s always a good idea to know where money is going. But it’s even more important when you’re teaching your kids about saving and budgeting since they will likely start to ask questions about their future finances once they understand how money works. How much can you expect them to have saved by the time they graduate college? Are there any financial emergencies that should be factored into their savings plan? Keeping track of what they spend now, along with expected growth in income, will help answer these questions as they come up in years to come.