Teach Kids About Budgeting
April 12, 2009 by Jennifer Chait
Filed under Kid Stuff, children's activity
In the last post we looked at if you should involve kids with the family budget. I vote yes, so here are some ideas that can help.
Explaining the concept of money:
Money is weird to kids; something I never realized until I tried to teach my son about it and he told me that he thought that “A toy car and a house probably cost about the same.” Just showing a kid money or just talking about it, is super abstract. Real life applications work better. Allow your kid to pay for items on a short shopping trip so they can see what it’s like to hand over cash and get a bag of food in return. Take them to the toy store with $10 and then go find all the items they could actually afford – also point out some they can’t afford and discuss how much more money they’d need to get the item.
Explaining the concept of budgeting:
You can use a pie chart or envelopes for this. If you use a pie chart (better for older kiddos) then chart off different areas like food, rent, electricity, savings, and extras. Envelopes are really good for teaching kids about the budget – even little kids seem to get this technique.
Grab some pretend paper money (preferably about how much is in the family budget each month). Stack it up and then have your kid help to brainstorm envelope categories – i.e. grocery, water bill, pet supplies, and so on. Make sure you have one envelope marked as savings and one marked as extra (or fun) money. After you jot down categories on each envelope have your child help you put the correct amounts per bill into each envelope. This is a good visual way to see how much cash ends up in the “fun or leftover” category.
Explaining the concept of a deal or choice:
The most common two ways people save money is by getting a great deal or by making a choice. Teach your child about deals. For example, if they always want a specific cereal, teach them how to find the store brand, a coupon, a sale, or some other way to get a better deal. Then point out that the money saved on the deal goes into the leftover money category. Teach about choices too. So if their choice is to skip the cereal above altogether, they can save even more money into the leftover category.
NOW: Tell me some of your best ideas for teaching kids about budgeting…
Hi, Jennifer. Love this post! I am a firm believer that kids learn best by experience. The only way to teach kids to handle money is to let them earn some and then let them handle it. If they make bad choices, let them feel that uncomfortable feeling of “I spent all my money on this?” It is better for them to have that feeling for the first time when they are young, rather than when they are an adult and the purchases are very expensive.
To stop the grocery shopping trip begging that is so common in a lot of families, involve them in the pre-trip planning for both the groceries and weekly meal menu.
Let them know how much is the spending limit, what needs to be bought and why. Let them look through the sale papers to find the items, clipping coupons for them, etc. Let them help with making the list and planning the meals based on the budget and what you already have in the house.
When they start things like the cereal aisle begging, just reply with “it’s not on the list” and then ask them why it isn’t on the list. Also pointing out that if it goes in the cart, something else can’t be bought or a cheaper version of it needs to be bought instead.
Teach them about unit pricing, too. This is very important. I am amazed at how many adults don’t understand it and actually think a box of 100 tea bags for 1.99 is a better deal than 150 for 2.79. (recent argument with my husband who still doesn’t get it)
Hey, thanks! I’m big on experience learning too – I raised my son as an unschooler actually. Now he’s at a child-led free school, so we’re always learning by doing. I agree too, about allowing them to get the worse decisions out of the way when they’re less pricey. A bad toy decision is sure better than a bad car or house or investment idea.