Budget Information for Kids
Kids don't spend much time worrying about paychecks, bank
accounts, or bills. They figure that's a job for parents.
But if you leave them in that fantasy world and never discuss
budgets, your kids might grow up thinking the money they need
appears by magic. Then they'll be candidates for financial
Fortunately, you can teach them what they need to know about
managing finances with just a few basic steps. Help them understand
where the money comes from, how to keep track of where it
goes and how savings can work wonders. You'll build habits
that will pay dividends for the rest of their lives.
For children, managing a budget requires three types of
Income - How much they typically earn
from allowance, chores, and gifts in a typical week, month,
Spending Habits - What they've been doing
with the money.
Goals - How much they think they should
devote to saving, spending, and giving away.
Armed with this information, your next steps to teaching
your children how to budget are straightforward:
Tally income first: Whether kids receive
money from a regular allowance or job, they and their parents
often are surprised at how much money actually comes in over
the course of a year. If your 12-year old gets a $10.00 weekly
allowance and usually received $20.00 for her birthday from
her uncle, ask her to calculate how much that comes up to
in a year ($10.00 x 52 = $520.00 + $20.00 = $540.00). That
should help her realize that there's a lot of money at her
disposal, if she can just be patient and save regularly, and
Take a look at where the money goes: It's
easy for kids to let that money slip through their fingers
without getting much in return. If your child has been spending
her own money for a while, help her track her spending each
week for four weeks. Divide the total by four to get the weekly
Set goals: Now your child has the information
she needs to make a budget. In the example above, a $540.00
annual income equals $45.00 per month. If she really wants
a new bicycle that costs $150.00, how much of her $45.00 does
she need to save to buy the bicycle in six months or a year?
For instance, it takes six months if you save $25.00 a month
for the new bike or four months if you save $37.50 a month.
Tinker with numbers: Kids who have spending
money for a while may need to learn to manage their spending
to buy the bigger things they dream about, such as bicycles
and guitars. If your daughter who wants the bike generally
buys two $15.00 compact discs each month, she may decide to
live with just one instead. Plus, she might cut out one movie
per month, saving $15.00 when you figure the price of a ticket
plus concession-stand snacks. By making those sacrifices,
she’s saving $30.00 a month. To speed her savings even
more, she may decide to baby-sit or do extra chores such as
mowing the lawn or washing the car.
You can reinforce the budget habit by putting the kids in
charge of some family expenses. As early as age 5, your child
can help clip coupons, compare unit prices, and watch for
sales on things you usually buy. Let him either keep the savings
or put the cash in a special jar for use on family outings,
computer equipment, or movie tickets.
Kids age 10 and up can manage all or part of the family entertainment
budget. You decide how much the family should spend each month
on movies, concerts, sports events and restaurants.
Then, every time the family eats out, orders a pizza, or
rents or attends a movie, the kids should enter the expense
on a simple ledger or computer spreadsheet. If the circus,
their favorite band, or favorite teams are in town, let the
kids figure out how to cut back on other family entertainment
to pay for tickets.
Your kids should keep a running balance from month to month.
It should never exceed the monthly budgeted allotment. If
they have a surplus at the end of the year, let them vote
on how to spend it.
In the end, your kids will become smarter savers and better