If you’re anything like me, you’re life and your sanity are crucially dependent on staying on budget. I’ve had enough embarrassingly difficult conversations with hubby regarding “What’d you spend all that money on?” to last me a lifetime. It’s not fun. And it’s stressful. The first thing I tell other moms who are in charge of the family’s finances is to create a realistic budget and STICK TO IT! I get into how I manage my family’s finances in THIS POST HERE.
But nevertheless, explaining the concept of “budgeting” to kids can be brutal. After all, kids think money grows on trees. Or better yet, mine used to assume that I could just head over to the bank and “get more money”. LOL.
I have come to believe that the easiest way to broach this subject is when they want something. For example, when my son was expressing interest in a new bike I saw this as the perfect opportunity to help him understand the concept of money and it’s value, how money is earned, and how money is allocated towards different things we want or need.
So starting with “wants” and “needs”, it is important for kids to first be able to distinguish between the two. Here is a simple little sheet that I made to help my kids easily identify a true “wants” vs. a “need”.
So going back to my example with my son and his desire for a new bike, he now clearly understands that a new bike is a wanted item and not a needed item. I assume that most parents have a conversation with their kids DAILY about something they want, am I right?
So this is really the best time to help them understand the money our family has is money that was earned and DOES NOT grow on trees and they DO NOT just hand out money at the bank.
So as responsible adults, we have to decide what to spend our money on. After having gone through the worksheet, kids should be able to distinguish between the need to pay rent or mortgage versus the want to spend money on candy, for example. And this is called a BUDGET.
A budget in simplified terms:
- An estimate of how much money we have minus how much money we expect to spend
- A prioritized list of things we need to spend money on
- A way to set goals with the money that is leftover
Give them examples of some of the things you budget for each month, such as groceries, new clothes, sports equipment, family entertainment or activities, etc. Explain to them that these are things that your family values and therefore choose to spend money on. When other things come up, such a an unexpected expense, you have to adjust the budget. In other words, if you need to repair the air conditioning unit one month you have to adjust how much you spend on the other things you normally budget for in order to pay for this service.
Things to avoid:
- Don’t get frustrated or upset when they don’t catch on right away to these concepts and continue to ask and plead for things not in the budget right now.
- Don’t ever use words like “broke”, “strapped”, or “poor”. These terms are confusing for kids and creates an atmosphere of anxiety around money.
Do this instead:
- Say something simple such as “We’ve already spent our movie money this month, let’s go to the movies again NEXT month.” This helps them understand the concept of moderation!
- “Ok, so you want a new soccer ball. Let’s look at the budget and decide where to divert that money from.” Teach them how to make responsible decisions with money.
- Let them earn money themselves! And I don’t mean chores. I do not pay my kids to be active members of the household by making their beds, cleaning up their toys, setting the table, or helping with yard work.
Instead offer them jobs around the house that you are willing to pay for. A few of my favorites: wiping down the baseboards, picking up fallen citrus, sweeping out the patio or garage, or tidying up the river rock throughout the landscaping.
I post these jobs on a tack board with dollar bills attached to them; however much I’m willing to pay (usually $1-$2). This is an important point!
Kids are waaaaay more motivated to do a job if the money is present (and for the taking) right in front of them.
Once they’ve earned a few bucks, talk to them on what they want to spend their money on. Is there something that they would like to save up for?
If there is, then help them determine how much it will cost and what they can do to earn the money. Here’s a simple, kid-friendly budget sheet to use!
What are other ways you foster a healthy and responsible attitude around money for your kids??? I want to hear it! Comment below and share your tips and tricks for teaching kids about BUDGETING!