Helping Kids Learn How To Budget
Financial concepts can be tough to grasp for young kids. They may have a lot of years left before they're expected to be financially independent, but it's never too early to introduce the ideas of budgeting and saving. By helping kids learn how to budget and manage money at a young age, they'll gain a greater appreciation for the value of currency.
Help Kids Learn Responsibility
Kids should understand the underlying value of money – it's not just paper. Adults know that it takes a lot of hard work to generate a paycheck and one of the first concepts children can learn is that things aren't free. Giving kids an allowance is an often debated topic among parents, but it can be a useful tool that teaches kids how to save and spend.
Let Them Manage Their Own Money
Allowing kids to pay for their own items is another way to teach them about spending and saving. Give them a portion of their birthday money to put in a wallet and spend on small items like snacks at school, books or arcade games. You may be surprised how much thought kids will put into purchases once they realize they only have a limited amount to spend.
Allowing kids to pay for their own items and count change is also another way to reinforce financial responsibility. If they make a mistake, it might cost them, but the lesson learned will stick with them in the future. In fact, according to T. Rowe Price, kids whose parents let them make financial mistakes were more likely to believe they're knowledgeable about managing money and believe their parents do a good job teaching them.
Talk to Kids About How You Save and Spend
One of the best ways to help kids learn how to budget is to talk them through real-life examples. If your family takes a vacation every year, discuss ways you save to pay for the trip. Talk to kids about reasons why you do or don't buy a new television or car. Take them shopping and work through price comparisons of major ticket items. Helping your kids think long-term will teach them that budgeting and saving is a year-round process.
Show Kids Their Bank Balances
Finally, if your kids already have savings accounts, show them the balances. Explain how the money got into their account and how much interest has been earned. Talk to them about savings goals. Will this money support them when they go to college? Create a spreadsheet to reconcile their bank accounts or let them practice balancing a checkbook. You can also find interactive games and activities about money online. The more kids learn at a young age, the better they'll understand the importance of budgeting and saving in the future.
If kids learn how to budget, they'll take a greater interest in their own finances and be better prepared for financial decisions once they hit adulthood. Rather than managing their money for them, start small and gradually allow your kids to take more responsibility for spending and saving. Setting a good example can also teach kids about the best ways to handle large expenses in your household.