Nothing feels more adult that setting a budget and sticking to it. But it isn’t something you just inherently know how to do. Like with all essential financial skills, we start learning at a young age. Habits established early set the stage for success later in life.
Here’s some helpful expert advice for parents looking to help their children learn about budgeting:
Talk at Their Level
One of the key steps in teaching your kids about budgeting is to adapt your approach based on how old your child is - advice given to a five-year-old needs to be presented in a vastly different way to a 15-year-old.
For kids five and under, keep the advice concrete and tactile, advises Victor Wang , CEO at family-focused investing platform Stockpile. Start by letting your kids hand cash to the cashier while you’re shopping. A savings jar is another important technique, as it gives your little one a visual way to understand saving…
A weekly allowance for elementary-age kids
If your children are in elementary school, consider a $10 weekly allowance to show them how taxes and expenses work, said Larissa Adamiec, a financial economist and clinical associate professor at Purdue University.
However instead of giving your child the entire $10, take $1 or $2 out for taxes, $2 for long-term savings of at least 10 weeks, and $4 for short-term savings of at least four weeks.
“The rest of the money [would have] no restrictions,” Adamiec said. “This technique demonstrates how to view saving for an item and the appreciation of that purchase.”
Challenge your older kids and give them freedom
As your children grow older, you can introduce more advanced financial and budgeting concepts.
“While they probably already know the basics of what money is and how it works, you can start with topics like paying bills, investing for future goals, what taxes are and how they work, or the difference between debit cards and credit cards,” he said.
Additionally, it’s important to give your tween or teenager the space to make mistakes with their money, Wang said.
Frame budgeting as a positive
Emphasize that budgets are a way to achieve your goals, not limit them. In doing so, kids learn how to be conscientious about their money management.
“When teaching kids budgeting, frame it as something that helps people create a plan for their money, so they can reach their goals, instead of something restrictive,” Wang said. “That way, kids learn it isn’t about keeping yourself from spending at all costs, but prioritizing your money for different purposes and spending responsibly.”
Get them involved in the day-to-day
There are plenty of ways parents can get their kids involved in day-to-day money decisions that impact the whole family. For example, schedule monthly family budgeting meetings where you can review the past month’s spending and make adjustments to your budget, said Stoy Hall, CEO of wealth management firm Black Mammoth…
Be smart about what information you share with your kids based on their age, Wang cautions. Going through family debt with younger children could be stressful for them…
Value financial literacy
Financial literacy is an important part of your children’s development into financially responsible adults.
“Teach lessons and build habits early, talk about your values and expectations often, model the behavior you want to see, and celebrate the wins while learning from the losses,” Wang said. “Most of all, help kids see money as a tool, not a mystery or stressor. Because kids who grow up with that mindset become more confident money managers.”
To learn more, click here.
Remember, the important thing is to have regular conversations with your child about finances. You can tackle more advanced topics as they grow older. But you want to start early and continue to build their knowledge through the teen years. The goal is to send them out into the world prepared.