Teach Your Child About Budgeting Money

Teach Your Child About Budgeting Money At An Early Age

Teaching your child about budgeting moneyPinUntil your children reach college age, experts say not to waste your time trying to teach them about investing. They really don’t have any interest in investing at the younger ages, but generally are receptive to learning about budgeting money and saving. Of course, there are exceptions, and if your child is interested, then go for it.

We do recommend however, to place a priority on teaching your child money management and budgeting money at an early age, especially when they begin receiving an allowance. It’s a shame that more adults living today didn’t receive proper training in creating a budget and living within it. The number of home foreclosures and bankruptcies being filed on a daily basis, point this out.

We realize, however, that the current economic downturn, and job losses, led many to bankruptcy through no fault of their own. Some bought large homes with low floating teaser rates, and then when rates increased, they were caught in a squeeze.

One financial expert being interviewed gave a good example of a budgeting money lesson. His teenage daughter wanted to give a party at their home and he gave her a budget that she had to live by. Her idea was to have the party catered by a local restaurant. He advised her that with the budget given to her, there was no way she could afford a caterer. She was sure that she could until she called the restaurant.

All of a sudden, reality set in and she learned a very good lesson. Being creative, however, she went to one of the discount chains and bought the appetizers and other food she needed for the party. With a little more work, she pulled it off and didn’t exceed her budget. That father did his daughter the biggest favor, teaching her a perfect lesson in budgeting money.

Have you been in a store with your child and her eyes open wide at some impulse item that she wants, but doesn’t necessarily need, and she literally begs you to buy it? (Who hasn’t?) Instead of simply saying “no, you can’t have it”, a better way is to let her know that you have a home payment, a car payment, and are trying to save for the child’s college education. Because of that, money is limited, and you simply can’t afford to buy all of those things that we want.

Many parents are reluctant to reveal their finances with their children, but usually it is best that they are aware in a general way. Some parents believe that the schools will teach the child about money, but historically, that hasn’t been the case. Perhaps that is a part of the reason that children get into trouble with credit card debt as they get older. Some of their more affluent friends have everything, and these kids just buy so many things they don’t need, maxing out credit cards without the income to pay it.

The parents that don’t talk about budgeting money with their children may have concerns with the child knowing the details of their finances. But, there is no need for them to know how much money you earn, or how much your mortgage and car payments are, or any other bills that you may have.

The experts say that when your child enters middle school, they should be taught that you don’t have an unlimited source of money. A good way to express it is to say that you earn a certain amount of salary at your job, and on payday, before you even see your check, the federal and state government takes about one third for taxes. That leaves about two thirds for the family to live on.

In order for the family to stay in our home, we have to pay the house payment, and then gas and electric, water, telephone, and a car payment. After all that, we have to buy food, clothing, braces, and other medical expenses. If we buy this item that you want, then it means that we can’t buy or pay for some other item in our budget because our money being earned is a limited resource.

You can give your children an allowance, but it won’t teach them budgeting money as their housing and food is taken care of.  They will make some choices with their allowance like buying treats or going to a movie, but this isn’t real budgeting that they will have to do one day when they’re on their own.

Children have to learn that if they buy a certain item, then they won’t have the money to pay for something else they may need. Unfortunately, as they get older, and get into the bad habit of using a credit card if they don’t have the cash, they can build high debt quickly and get into trouble because they have no funds to pay it.

Somehow, we need to teach our children that many things we want are worth waiting for. Teach them that it’s best to save the money to buy those new jeans or new telephone, and to pay cash for them. Get them to start creating a budget, as simple as it may be, and living within it. Budgeting money is not difficult to learn.


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14 responses to “Teach Your Child About Budgeting Money”

  1. Avatar of Tamara Rempel Tamara Rempel says:

    When I was a kid, like as young as 7, I naturally had budgeting skills. I always wanted to save my money and couldn’t understand why all my friends blew all their money on toys or candy as soon as they got money. I even made lemonade stands and entered kids’ contests to try and make money. Don’t tell me a kid is too young to understand. They can understand, and may even have natural skills. Parents out there just need to really push budgeting / saving money like the articles says :).

  2. Avatar of Michael Hill Michael Hill says:

    My son always wants to blow his allowance money on candy or video games. He’s 13. I think I should start trying to teach him some restraint. My wife and I got in a bad habit of letting him spend his money when he got some, but I think we just created a monster.

    • Avatar of Gust Gust says:

      Thanks for stopping by Michael. Yes most kids will spend their allowance quickly and one 13 years old, can be taught to save a part of it. They learn fast, (after complaining), and get the idea. Good luck.

  3. Avatar of Kim Rawks Kim Rawks says:

    The example of the teen girl and budgeting for her party was a great lesson learned – one she’ll carry with her for years to come, especially in college!

    • Avatar of Gust Gust says:

      Yes, she’ll remember that experience for a long time. Sometimes, we all need that type of a lesson as a reminder.

      • Avatar of Jennifer D. Jennifer D. says:

        Kim, unless the kid gets sent to school with their parent’s credit card. I know so many like that who still have no idea about the value of a dollar because their way is completely paid for. Sad to leave college without that basic skill.

  4. Avatar of Stacey Stacey says:

    I wish I’d been taught more about budgeting and money matters at a young age, I messed up my finances big time when I went to university and years later I’m still recovering and trying desperately to rebuild my credit score. I think it should be compulsory for kids to learn in schools, especially in this financial climate

  5. Avatar of ed pierce ed pierce says:

    How young would you suggest starting teaching them this? My three year old is very cautious with her money but I wouldn’t say that she is able to budget it the way we, as adults do.

    • Avatar of Gust Gust says:

      Three years of age is probably a little young to grasp the concept of budgeting. However, I have seen kids five or six who understood, and were able to save part of an allowance, as well for other things. Each child is different, but we need to start early.

  6. Avatar of Mandy Allen Mandy Allen says:

    It’s a great idea to discourage parents from giving out credit cards to youngsters. It really does nothing to help them to learn the value of money, especially when the parent is paying off the debt every month.


  7. Avatar of Jessica Jessica says:

    It’s so easy to spoil a child that most parents wait until it’s too late to try and teach them about money.

  8. Avatar of toby kyle toby kyle says:

    After we explained to our children what putting money in a savings account meant, they were super excited to save. We explained that they would be drawing interest and what that meant and our bank also gives them a gift each time they deposit money. i don’t think it is ever to early to get children involved and I think they should be involved in the family budgeting but no to the point where you are causing them more stress. For instance, they should know why a budget is set and how to manage one but, you should never let them hear you fighting because you don’t have the money to pay for a bill.

  9. Avatar of AJ AJ says:

    I think a lot of the problem is what parents consider the child’s money. If money is given them as an allowance or just for the asking, they have little respect a buck. The thinking is, “Mom and dad will give me more when this is gone.” I worked for my father to earn my “allowance” since I was very young and was paid at or a bit better than minimum wage. I always had more money than my middle class friends, but I spent less than they did. I wasn’t cheap, but before I spent a dollar I’d reflect on just how long I’d have to work for that dollar, and just how badly I wanted or needed whatever I was thinking of buying. I guess this was my budgeting education, and it had me driving my own tricked out car the day after I got my drivers license. My friends were asking to borrow the family sedan or minivan to go anywhere so I was very pleased with myself. A decade later I still look at anything I buy in terms of what amount of time I invested, or have to put in to pay for it.

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