It’s not too early to start teaching your kids about money and budgeting for kids. Learn how to teach kids of all ages how to budget, save money, invest money, donate money, and more. Includes a printable budget for kids activity sheet!
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Budgeting for Kids: Nope It’s Not Too Early To Teach Them
Think of what kids learn in school when it comes to money management.
If your grade school and high school was like mine, probably not very much. I learned calculus and algebra and as much of a hoot as the Pythagorus Theorum is, high school taught me almost nothing about managing money.
Luckily my parents were into financial literacy but they wouldn’t have called it that at the time.
They had mason jars for budget categories like entertainment, groceries, gifts, etc. They gave themselves an allowance each week too. It was basically a mason jar version of the cash envelope system. (Here are 7 important money lessons we all should have been taught, but probably weren’t).
Budgeting for Kids: To Allowance or Not To Allowance
The decision to give your kids an allowance can be a bit controversial and you have to decide what makes sense for you and your family.
You can decide to pay an allowance that isn’t tied to completing household chores.
I am pro allowance and I’ll tell you why.
First of all, I grew up getting an allowance so it’s the model I’m used to. But this definitely isn’t the main reason I want to give Miss O an allowance.
Kids will need to buy things or spend money on outings. Whether that is supplies for school, books, toys, snacks, or going to the zoo or the movies, that costs money. Little kids are not going to have jobs so that money is going to come from us the parents. Whether we give them a weekly allowance or give them $25 to buy a particular thing, the money comes from us (until they can get their first jobs as teenagers).
I like the idea of a weekly allowance because it has a built-in pause factor. Something that I think more adults need when it comes to making purchases.
If we hand over money when our kids need or want something, then that is fairly instant gratification. But an allowance is a smaller amount of money, doled out usually weekly. If your child wants to buy something that is more than a week’s allowance, they need to save up. There is the built-in wait factor and I think that’s a super important muscle to develop.
Related reading: Creating a Monthly Budget: Easy Steps to Get Control of Your Money
6 Important Budgeting Lessons to Teach Your Kids
1. Live within your means.
This is probably the most important money lesson for kids and adults.
With so many Americans in debt even as our wealth increases, this seems to be a hard lesson to learn. When our income increases, it’s easy to slide into lifestyle inflation. Upgrading car, house, increasing spending to burn through all that extra money, instead of growing an emergency fund or retirement fund so you can stop working earlier.
If you give your kids an allowance, many families increase the allowance amount each year. Teach your kids about paying attention to the amount they get, and thinking of future purchases they might want to save or wait for.
Related reading: 8 Clever Budget Tips for Families That Will Save You Tons of Money
2. You are compensated for your work with money.
This ties in to the decision on whether or not to give an allowance to your kids.
But unless you live in a commune where duties and money and material goods are all pooled, or you are unable to work for various reasons, the majority of people work for money.
Even if you are in a position of high wealth and could have your kids afford to never work, it’s still a good (a great) idea for them to know how the majority of people earn money.
3. The difference between wants and needs.
Your kid might want a new Fancy Nancy doll (okay that’s my kid). But she might need a new pair of shoes for the summer. You can start teaching even little kids these basic terms.
Older kids can learn about wants versus needs by having to save up for their bigger wants themselves, or do extra chores to make some extra spending money.
4. Share with those who have less money.
I have already been teaching Miss O about privilege.
She happened to be born in an overall wealthy country with educated parents who are now debt-free. I want her to know from an early age that not everybody has the same things.
She has what feels like grillions of choices of food and snacks every day while some kids go to school hungry. She sometimes has multiple of the same book or toy. I’m slowly teaching her that we share our things with people who have less.
5. Let your kids make money mistakes.
Your children have the huge safety net of living under your roof. This is the time to let them make money mistakes.
You can be there for your kids to help them learn, without swooping in to rescue them right away.
They might spend all their allowance money in two days and have to say no to something fun that turns up that costs money. If you rescue them each time this happens, they won’t learn the consequences of spending without also saving.
Now is the time to help them learn this lesson, before they are out living on their own.
6. Explain credit cards and debit cards
You can start with basic language for younger kids, but let them look at your bank cards.
With older kids and teenagers you can – and I think should! – teach them about the difference between credit cards and debit cards. Teach them the terms minimum balance and paying off your bill in full each month.
I got my first credit card when I was 19 and went away to university. I really had no idea how to use it. I paid the minimum balance every month because it seemed like that’s what the credit card statement was telling me to do. I learned quickly when I started getting these annoying extra payments called “interest” on my subsequent statements.
Teach your kids (and yourself!) about paying your credit cards off in full.
Budgeting for Kids Printable Worksheet
You want to make budgeting for kids fun and not boring! Especially with younger kids, learning is done through play.
I made a fun printable coloring page that you can download and print off for your kids to color. At the same time, they will be learning important money lessons about saving!
It’s a picture of a money jar (just like the mason jar cash system my parents used!)
Help your kids learn important lessons in saving money (while they will just think it’s fun!):
Grab your free saving money coloring sheet HERE ?
My Favorite Money Bank for Kids
Since I have a personal finance blog and I’m into learning and sharing about money, I did a TON of research to find the best savings bank for kids.
I love this one so much and am definitely going to get it for our daughter. It’s called Moonjar and it’s for kids 3+ all the way up to preteens.
Little kids can plunk coins into the different colored compartments. The openings fit folded bills too. Little kids will like the colors and shapes of the canisters.
Older kids can practice math skills and learn some basics of financial literacy.
What I love most about the Moonjar is it has three compartments for money: SAVE, SPEND, and SHARE. I love that it teaches kids not only to save money for later, while having money to spend in the present, but also sharing your money with others. Kids can decide if they want to donate the SHARE money to an animal shelter, Christmas gift drive, homeless shelter, church, or anything that they have interest in.
When Miss O is older, I’d like to add 5% interest to her SAVE canister so she can start to learn about the importance of investing instead of just saving. She’s only 5 now so she’s a bit young for lessons in investing and interest (I’ll wait until at leeeast 6!! Lol)
If you’re interested, you can get a Moonjar here.
How to Teach Budgeting to Kids – Teach Yourself Financial Literacy First
A lot of us just weren’t taught the basics of money management, staying out of debt (or how to get out of debt), saving and investing money, and budgeting. It’s not too late to teach ourselves so we can teach our kids to know more and do better.
To brush up on YOUR financial literacy so you’ll know the important things to teach your kids, check out these posts:
- Struggling Financially? 15 Tips From People Who Are Never Broke
- Epic Tips You Need to Get Your Mortgage Paid Off Faster
- 5 Important Money Habits You need to Have Good Finances
- How to Spend Less Money in a Tough Economy
- 15 Best Budgeting Books You NEED to Read Now
- 5 Best Budgeting Tools You Need if You’re Bad with Money
- The Best Budgeting Apps for 2021 to Manage your Money
- How to Improve Financial Literacy in 7 Simple Steps
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