Essential Budgeting Tips to Teach Your Kids

No matter how young your kids are, it’s never too soon to begin teaching them the basics of budgeting! Learning essential budgeting skills from an early age is a critical component in the development of financial maturity. Start by weaving these important life lessons into everyday activities! 

Help Your Children Differentiate Between Wants and Needs 

For very young children, money talk may go over their heads. Rather than attempting to discuss finances with your little one, set a strong foundation by helping them differentiate between their wants and their needs by taking the following steps. 

• At the grocery store, ask your kids whether each item is a want (think ice cream, candy) or a need (think fresh fruits and vegetables, carbs and protein) 

• At the big-box store, explain to your children that although they may want every toy in the store, that doesn't mean they need every toy in the store. 

• At home, discuss some of the reasons why your family may need to skip refurnishing the bedrooms this year to afford a family vacation (and similarly delayed gratification or trade-off situations) 

Use an Allowance to Teach the Value of Money 

Giving your children an allowance can be a useful financial tool. You can use the allowance to help teach your kids about the value of money every day. To make the most of this tool, you should: 

• Set a strict allowance amount that your children will receive once per week or per month and do not exceed that amount  

• Encourage your children to save at least part of the allowance 

• Allow your children to purchase their own toys from the store using their allowance money 

• Talk about the purpose of the allowance with your children to help them understand that money doesn’t grow on trees 

Discuss Financial Realities With Older Children 

If your children are on the older side, it may be time for frank, sit-down discussions about the realities of finances. Older children are prepared to handle bigger budgetary concerns and to handle their own finances one day soon. Work through these steps to open a healthy financial discussion with your teen. 

• Discuss the realistic salary ranges of the jobs your child is interested in and whether they would be enough to sustain the lifestyle they want 

• Talk with your child about the typical costs of everyday items and necessities such as rent, insurance, and groceries. 

• Emphasize the importance of saving at least 20% of take-home earnings, regardless of salary 

Instilling good money habits in your children that will serve them well throughout their lives starts with teaching them about budgeting at a young age. However old your children are, you can teach them these essential budgeting tips by working this advice into everyday life.