Teaching kids how to budget their money is a life skill that can begin at an early age. Here are a few ways you can help your kids get started.
“I forget what I’m saving my money for.” My youngest said as we walked around Target. “So can I get something with my allowance?”
And therein was the problem.
It’s not that my daughter had seen something on a shelf and decided she wanted it. With $20 in her savings jar back home, she just wanted ANYTHING and had forgotten why she’d put that $20 aside.
My daughter was falling into the mindset many adults do: satisfying instant gratification instead of saving towards a larger goal.
Speak to any financial planner and they’ll tell you learning how to budget money and live within a budget is an essential skill to a secure financial future. A budget provides a plan to ensure all of a family’s or individual’s needs are covered.
So helping young kids learn that budgeting can help them achieve their financial goals (however minor those goals may be at this age) is a valuable lesson that will help them into adulthood.
The Trick to Getting Kids to Budget and Save Their Money
Something had to change. Clearly, my daughter didn’t understand the value of setting money aside for a greater goal.
Over a year ago I set up an allowance for both my girls – including jars that divided their money between spending money, savings, and money to donate. So far the girls had begun to better understand that items we buy in the store require money and that money is finite.
But the idea of setting money aside, or rather delaying gratification, was still not getting through. More was needed to teach them how to budget their money.
What became clear during the conversation in Target with my daughter, is that she needed a way to keep her savings goal top-of-mind. She needed to write it down.
So I created a money binder for each of my girls with a sheet that allows them to keep track of their savings and another that lets them see what they have spent their money on.
It’s not quite the same as a budget an adult would make – determining how much money is needed for food, housing, clothing, etc. – but my girls are young and these basic sheets are good practice before they have greater needs and wants.
Below is the savings sheet my girls now use to keep track of their goal, how much they have saved, and the impact interest payments have on their savings. (To read about how I teach my girls to save their money and why I pay them monthly interest, click here.)
In addition to the savings sheet, I also created a spending sheet. My hope is that a written record of how my daughters have spent their money will teach them how impulse buying makes it more difficult to reach a savings goal. It also serves as a reminder of past purchases that weren’t as fulfilling as originally expected (a.k.a. buyer’s remorse).
Now every Sunday when my kids receive their allowance, they’re responsible recording that money on either their spending sheet or savings sheet depending on in which jar they choose to put their money. And when they make a purchase, they record it on their “My Spending” sheet.
Trying to Raise Savers
That day in Target was eye-opening for me.
As my daughter contemplated spending her $20 in savings I began to wonder if I had done something wrong. Was providing my kids an allowance just making them flush with cash and not teaching them money management like I’d hoped?
Fortunately, I was eventually able to dissuade my daughter from buying whatever looked interesting in Target. We talked about how saving her money for something she really wanted would be a better use, and she eventually agreed.
The next week I provided both girls with binders filled with the spending and savings sheets above. They both began writing down their savings goals and keeping track of what they’ve spent their money on.
And it’s paid off.
Over the past six months, there’s been a change.
Now when we go into a store my daughter doesn’t search the store for something to buy because she knows she has a larger goal she’s saving for.
The practice of managing her own money has also made her more aware of costs and the value of items for sale. For example, she now asks how much a dish at a restaurant costs and will look for something else if she discovers it’s too expensive.
This is all to say that teaching kids how to manage their money isn’t easy and there will likely be more bumps along the way as we continue this journey. But knowing that my girls are beginning to get “it” – to understand the difference between needs and wants, that it’s worth it to delay gratification for a larger goal, and that money really doesn’t grow on trees – makes the process worth it.