Basic Budgeting Tips for Kids that are Never too Early to Start Trying

by Paige Connor Totaro

A little kid laughing

It’s a concept even some adults have trouble with: the basic idea that the amount of money coming in must be greater than or equal to the money going out. But the earlier you can teach budgeting skills to your kids, the more likely they’ll be to develop their own financial independence.

Budgeting for Kids

Give them candy

Actually, give them money to buy candy, and watch them figure out how they can get the most sugar into their bodies for the least amount of money. My parents gave me a quarter to buy a little brown paper bag full of penny candy, which even by then cost 2 cents each. Their parents gave them a nickel. So maybe you need to give them $5 for the same kind of all out glee that comes from picking out WHATEVER CANDY THEY WANT that fits in their budget.

Just make sure that the amount you give them will actually cover a few pieces of candy, so that they’ll have to actually make a decision. If there are items that cost more than the amount of money you’ve given, use that as an opportunity to explain that you can only spend money that you have. 

Give an allowance, but be smart about it

Survey other parents to see what they do for allowance. Of course you’ll make up your own mind about what you give, but you don’t want your kid to get a lot more or a lot less than other kids. There will always be outliers (“Connor gets $100 a month and however many video games he wants.” “Well Connor’s parents invented [insert wildly successful business here], so things are a little different for them.”), but try to keep your kids’ allowances within the norm.

A good starting place is to give your kids $1 for each year of their age. So, a five-year-old would get $5 per week, and a 10-year-old would get $10 per week. While $20 per month may seem like a lot for a kindergartner, think of it as a replacement for other discretionary spending you’d do for you child. Next time you’re at a carnival where junior wants to waste money on rigged games, tell them they’re free to do so–but you’re not going to pay for it. That’s what the allowance is for.

When you start giving an allowance, start them saving, too

It’s okay to control how your kids spend some of their money at first. If they get $10 a week for allowance, put $1 of it straight into a savings account for them, and $1 towards charity (or whatever goals you want to set for them). Do the same when they receive monetary gifts. Have glass jars set up for the savings and count it up each week – both to show how the money grows and to make sure no one sneaks any cash out. Glass jars are also helpful for younger kids, who tend to be more visual learners.

Make a budgeting game out of grocery shopping

Once your kids have the math skills, have them help with finding bargains and learning the value of money. Start with a small goal, say, giving a budget for a meal and having the kids help find the ingredients while staying within your budget. Tell them what you need and how much money you’d like to spend, and let them come up with the plan.

You can do your research ahead of time so you have a general idea of how much the ingredients for a simple pasta meal will cost, and let them try to make the numbers work. They might even be willing to try some new ingredients or look for sales or coupons to help keep costs down, if they are the competitive type.

Then look for other opportunities to give your kids a budget to spend. They might take over back-to-school shopping, for example, or even plan some of the activities on your next family vacation. The more experience they can get actually budgeting and making decisions, the better.

Teach your kids the magic of compounding interest

For some kids – and adults, to be honest – the thought of becoming a millionaire is quite attractive. Show them some samples – easily found on the internet – of how to make a million dollars by saving and investing from an early age. Pick some funds to follow, to talk about how investments work, how interest works, how reinvesting dividends works. Better yet, open a custodial account in their name and allow them to actually invest money and watch what happens to it over time.

Giving your child basic budget skills will set them up for success when they leave for college and need to start managing their money on their own for the first time. After all, the sooner your children can reach financial independence, the sooner you can double down on your own financial goals without worrying about supporting them.

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