Teaching Kids Money and Budgeting Skills
Whatever your child's age, there are many ways to ensure you raise a kid who can spend wisely and save for luxuries. Read through these tips, think about the values you would like your child to learn, and implement whatever you feel will do that best.
Start with Basic Concepts
Introduce Money: Kids learn through play. Introduce the concept of money by including a ticket to hop onboard the cardboard box 'train', making up recipes that need to be 'shopped' for, or doing pretend jobs paid for with paper money. Older children can learn through board games like Monopoly or planning for a dinner party or family meal. Introduce them to real money and the different denominations, too.
Explain Needs vs. Wants: Help them understand the difference between necessities (needs) and nice-to-haves (wants).
Discuss Values: Your child will naturally pick up yours, but it can help to be intentional in how you discuss them to ensure the values you want your child to have are overt. It can also clarify your thoughts and feelings about money and adjust any unintentional messages you send.
Set Up an Allowance
Regular Allowance: Give them a small, regular allowance to manage. This can be weekly or monthly and can increase as they get older.
Earning Money: Encourage them to earn money through small jobs, fostering a sense of responsibility and work ethic. Intrinsic motivation is an important life skill, and paying them for things that develop it can have a negative impact, so think carefully about what you pay for. I'd recommend keeping jobs separate from things they do to participate in the smooth running of the house, such as putting their laundry in the basket.
Teach Saving
Savings Jar or Bank: Use a clear jar or a piggy bank so they can see their money grow, or use a child-friendly bank account with an app that allows them to monitor their savings.
Set Savings Goals: Help them set short-term and long-term savings goals for items they want.
Introduce Budgeting
Budget Plan: Create a basic budget with categories like saving, spending, and sharing (for donations). When they are old enough, I recommend making this a comprehensive one that helps them make harder budgeting decisions.
Track Spending: Teach them to track their spending using a notebook or a simple app designed for kids.
Involve Them in Family Budgeting
Grocery Shopping: Let them help with grocery shopping by comparing prices and making choices based on a budget.
Family Budget Discussions: Include them in age-appropriate discussions about family finances and budgeting decisions.
Teach Wise Spending
Value Comparison: Show them how to compare prices and value before making a purchase.
Delayed Gratification: Encouraging impulse control and teaching patience in all areas can help develop thoughtful spending. An exercise I did was to get my daughter to draw her dream dress. A while later (when I knew her tastes had changed), I asked her to do it again. It's helpful to refer back to, and she now waits to see if the latest trend is something she wants or is just being pulled into.
Encourage Generosity
Charitable Giving: Teach the importance of sharing by setting aside a portion of their allowance for charity or saving to get food for a food bank or to make a meal for a neighbour.
Volunteering: Involve them in volunteer activities to understand the value of giving time and effort, not just money.
Lead by Example
Model Good Behaviour: I've started using the same app as my son to show him some of my budgeting choices – it's good to be pushed into better habits by the kids!
Discuss Mistakes: Share your own financial mistakes and lessons learned to show that it's okay to make errors and learn from them.
Share your Feelings: Mentioning that you felt disappointed that you couldn't afford something or angry because money was wasted or regretted a financial decision and how you have helped yourself move on from those emotions can help your child.
Reinforce and Review
Regular Check-Ins: Discuss their budgeting progress regularly, celebrate their successes, and help them adjust their plans as needed. Remember to check in about the emotional side of things, too. It can be hard to listen to your child moaning about not being able to buy things or getting angry because other people can, and it is very tempting to tersely remind them of their good fortune. However, if you can bite your tongue, you will help them untangle how they feel and move forward with a new plan.
Accept Mistakes: Your child will make budgeting mistakes, lose saved-for items, put holes in prized clothes and face many of the things we've already done and wish we could protect them from! You will warn them and they won't listen, and while you might not feel like it, being supportive will help them learn the lesson just as well as if you piled in with criticism and 'I told you so's'. With your relationship intact, they might just listen next time!
Positive Reinforcement: Even when they make mistakes, praising their efforts and successes in managing money can help them get back on track.
By starting early and making the process enjoyable and educational, children can develop strong financial skills that will benefit them throughout their lives. Money, however, can be an emotive and difficult subject. Understanding our relationship with money, making practical choices and defining family budgets are all areas of life coaching that I can support you with.
