Teaching Your Kids How To Budget & Preparing Them For Life

 

Empower your kids with essential money skills: Budgeting, decision-making, savings, and financial responsibility. Prepare them for a successful future

A monthly budget is a foundational piece for healthy finances. Teaching your children how to budget will serve them throughout their lifetime, especially because it’s never formally taught in schools as a part of the curriculum. 

That being said, guiding your child on how to create and manage a budget doesn't have to be difficult. One good way to help your children learn how to handle money is through early hands-on experience. How do you do that? By involving them in the family budget!

Why You Should Start Involving Your Kids in the Family Budget? 

Teaching intelligent money management and budgeting to your children will touch every aspect of their lives:

• They will gain confidence in themselves and learn good decision-making skills
• They will know how money works in the real world and how to put it to good use
• As your kids grow, they will see the value of hard work and saving for the future 
• You will be able to introduce them to concepts like compound interest and how they can help them build wealth
• As they're introduced to more complex ideas, their math skills will improve
• They will learn more about the economy and the real world

And most importantly, this practice will allow them to take on more responsibility for their own financial decisions. As a result, you can focus more on your future, knowing that your children have a solid foundation for financial literacy to help them through life. 

Budgeting 101 

A healthy financial budget is best accomplished when it’s updated regularly. We suggest a monthly budget. It gives you a good idea of how money flows in and out of the household. Most families stick to the same budget month after month, but that can cause problems sometimes. Each month is different in terms of seasons, birthdays, family expenses, health needs, and so on. A new budget each month ensures you're thinking about the bills for that specific month. This ensures that nothing falls through the cracks and that every bucket is taken care of.

Taking care of your household is the first step in budgeting. One way to ensure this is to think about the "Four Walls" first. These are:

• Food
• Shelter (including utilities)
• Transportation
• Basic Clothing

Addressing these necessities first ensures that your household's basic needs are being met. You can then begin budgeting for other bills, savings, and investing.

Another suitable budgeting method is to use a Zero-Base Budget. This type of budget gives every dollar a job to do. That way, no dollar gets lost, and the bottom line on the budget equals zero.

Why Everyone Should Know How to Budget

Creating a budget for every month will help you ensure that you’re not missing out on a bill due that month or unprepared for anything that life throws your way. 

Budgeting will help you keep track of the bills that occur quarterly, semi-annually, or once a year. This saves money on late fees or services getting cut off because of non-payment.

Knowing your expenses and how much money you have to work with also makes you realistic about what you can afford. This will help you stay in control of your money instead of your money controlling you.

Budgeting will also help you look at your wants and needs more objectively. Knowing the difference between the two will keep you from overspending. 

Simple Ways to Get Your Kids Involved in the Family Budget

You can start involving your kids in the budget as early as they are toddlers. Teaching the different coins and their value is an excellent way to begin at this age. It will help them see the value of money and set a foundation for future learning. This is also a perfect time to teach them simple chores like picking up their toys. You can introduce budgeting with a simple "Three Jar" system. This will teach them the first steps in budgeting by allocating money between:

• Giving
• Saving
• Spending

As they grow, you can expand on this concept and pay a commission for the chores they do. Unlike an allowance, this will teach your kids the connection between work and earning money. Children can take on more time-consuming and complex tasks as they mature. 

That being said, not every job around the house should be a "paid job". Some tasks should be contributing to the home, such as taking out the trash or clearing the table after meals. At this point, they should be responsible for one aspect of their life, like their own lunch money. You could show them the family budget and how much is in the budget for their lunches. They could then choose the meals and be able to save a little extra for special treats like ice cream.  

One time several years ago, I was getting ready to do the bills after payday. I realized that I had forgotten to order more checks and was down to one check in the checkbook. This was before online bill payments had become familiar, so this was a real problem. How was I going to pay the bills? After a few moments of panic, I pulled myself together and developed a plan:

First, I would put in a rush order for more checks. Then, I needed to pay my bills in person where I could or get money orders for those that needed mailing out of town.

So I wrote that last check I had to cash out my entire paycheck. At that moment, I had a flash of inspiration! At the time, my son was 10 years old. This was an excellent opportunity to help my son understand our household finances. So, I sat him down at the kitchen table and then placed the stack of cash in front of him. As you can imagine, he was wide-eyed when he saw all that money. I put the stack of bills next to the cash and explained that we needed to pay the bills using this cash. I told him this would keep the lights on and the water running and allow him to watch TV. We went through each bill together, doling out the money for each one. 

After this was over, all the bills got paid, and a much shorter stack of cash was left over in front of him. My son had a much better understanding of what it took to keep the household running. He also understood better where Mom and Dad's money went when they got paid. Only some were available for his next birthday present or movie trip. This lesson has stuck with him and has benefited his household for the better.

A child may get a chance to mow lawns or take the neighbor's dog out for a walk for their first job. It's an excellent opportunity to learn the added responsibilities of working for others. It also teaches them about customer expectations. This is a perfect time to introduce them to their savings account and even a simple budget graduating them from the jar system. You could sit them down with your budget and guide them as they create theirs.

High school is a critical time to teach your kids how credit works. Also, this would be a good time if they still need to get their checking account. If a debit card is part of the account, it would also give them more freedom with spending. But they also need to learn how those work and what overdrafts are. Involving children in the family budget and what part affects them will be a valuable lesson. This will serve them well as they approach adulthood.

Preparing to Teach Your Kids How to Budget

Teaching your children about budgeting and how money works isn't complicated. You can start early and build over time. Giving added responsibility as they grow will give them more confidence when it comes to making their own financial decisions. Your children will gain confidence in themselves. They will become successful adults and contributing members of society as a whole. 

To take the next step in preparing your child for financial success, you can explore the 3 Key Elements for Financial Growth.

However, sometimes teaching our children about money can feel daunting. And if you'd like to learn more about teaching your kids about money and budgeting, an excellent way is to connect with an Accountable-accredited Financial Accountability Coach through our FREE 30-Minute Coach Match session! 

This is a simple no-obligation call that’ll help you get a better idea of whether coaching is something you need, and how it can benefit you and your family. And if you do choose to move ahead, this call will help us connect you with an Accountable-accredited coach who would help you reach your goals and even teach your kids money from an early age.

Click here to book a call!

Here is another invaluable resource that can greatly benefit your child: Money Mavericks Video Game

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About the Author

My name is Tom Wallace. I guide families who are struggling with money through a simple plan of action to take control of their finances and fuel their dreams. If you are looking for an objective, non-emotional observer to come in and look at your financial situation, provide guidance to move forward and empower you to fuel your dreams then I am your man!

Since 2008, my family and I have been living the principles that I teach.  We have experienced significant debt, living paycheck to paycheck, and working hard with nothing to show for it in the end.  I have lived your world and I have come out the other end stronger and more knowledgeable.  I am all about my client's success. I now use the knowledge and experience I’ve gained during my financial journey to help others experience the amazing joy of having financial peace and to live out the dreams that your family longs for.