How do you teach kids about budgeting? Here’s a simple, step-by-step guide that will make teaching budgeting for kids feel do-able.
Let’s face it: budgeting for kids looks different than for teens or adults.
Kids face some interesting situations when trying to budget, and these can derail their efforts before they – or their parents – truly give kid budgeting a chance.
For example, kids may not be getting consistent income at this point (through an allowance, chore commissions, after school job, etc.).
Making decisions about money you might not have coming in can make the whole thing seem pointless, right?
Psst: being consistent with getting money in your child’s hands is one of the most important things in teaching kids how to budget and manage their money. Check out this article for how to set up your kid money system.
And they may not have any money responsibilities yet for what they have to spend their money on, like a teenager would.
Meaning they might not know what exactly to budget for.
Let’s dig into the simple ways to teach your child how to budget, starting with looking at common issues kids come up against when trying to budget the first few times.
But don’t worry – I won’t leave you hanging.
I follow this problem section up with a simple solution to many of these issues, and then give you the next steps to take when teaching your child to budget.
Budgeting for Kids – Common Issues
You might be feeling or witnessing some of these issues if your kids have already attempted to budget.
And if not? Then still give this section a read so that you can be aware of what might happen (helps you prep better, I promise!).
Here’s a quick list of typical kid budget problems to be aware of:
Psst: here's a guide on how to talk to kids about money to help you when these issues come up.
- Inconsistent Income Sources: Many times, kids have an inconsistent “income” source. This could be from an inconsistent allowance, earning various amounts on chore commissions, only getting money for special occasions (such as a birthday, Christmas, graduation, etc.), etc. Have you ever tried to budget with inconsistent money coming in? It’s challenging.
- Different Priorities than Parents: Some kids just aren’t going to agree with the spending percentages or rules their parents give them to use. In fact, they might lose interest over money because of this.
- No Purpose: Not feeling a sense of purpose with their money, mostly because they’re brand new at this (and don’t have money obligations to prioritize).
- No Money Goals: No goals for what to prioritize their money towards. Just sort of winging it.
- Wanting Something that Costs More than One Allowance Cycle: Trying to budget for something that costs more than one allowance/payday cycle, but not really knowing how to make that happen (aka, save money towards a short-term savings goal).
- Making their Budget Cycle Too Long: Trying to budget money for two weeks or a month at a time, and giving up because they run out of money wayyyy before the budget cycle renews. Who hates sweatin’ it until payday?
These issues kids face when trying budget are the reason why we’re going to introduce your child to a spending plan before they fill out their first budget.
It’s one extra step that will seriously solve many of these issues we just discussed, right off the bat.
Spending Plan vs. Budgeting
Think of your child’s spending plan as the architectural blueprint design behind their entire kid money management system.
It’s something they can fill in, whether they have consistent money coming in or not. And when they get money again, it’ll prove to be useful.
The spending plan comes first. Or, at least it should…but here’s a little secret:
most adults, let alone kids, skip out on spending plans
And that’s okay!
Because you can always go back and fill out your spending plan, even after you’ve been spending and budgeting money for months, years, or decades.
Spending plans are different from a budget because a spending plan is how you intend to use your money – based on what’s important to you – and a budget is divvying up your actual income for a specific length of time into bills, savings, spending, etc.
You don’t need consistent money (or any money, for that matter) to fill out your spending plan. But you do need money to fill out your budget worksheet.
Here’s a spending plan to get your kids started with this.
Next up – let’s talk about budgeting for kids.
How to Explain a Budget to a Child
Explaining a budget to a child who doesn’t have a regular income or regular expenses yet can be intimidating.
But don’t worry, we’re going to keep things simple at this point.
On top of some stellar kid budget resources you’ll hear about below, I’ve got an easy definition of budgeting for you to share with your kids.
Budget Definition for Kids:
A budget is deciding on how to use the money you have, for a specific length of time.
For example, if you have $30 (the money you have), then a child can create a one-week budget (the specific length of time) using a budget sheet or budget app to plan for how to use that $30. In this example, the child decides to save $10 of it, spend $15 on convenience store purchases and something from the checkout area at the grocery store, and put $2.50 towards a donation in her give-save-spend bank. She'll save the leftover $2.50 for next week's budget.
After the one week is over, they would create a new budget.
To break it down even further, here are the absolute basics of budgeting:
- You earn or receive money (income)
- You need or want things/experiences to spend it on (expenses)
- You track where your money is going (tracking)
Collectively, this becomes your kid’s budgeting system.
Next up, let’s talk about budget resources for kids to build their personal budget system.
How to Setup a Budget for Kids – The Budget System
If the spending plan is your child’s intention for their money, then their budget system is how they express the spending plan and those priorities while managing money day in and day out.
Both really important tools to use when teaching kids about money.
Let's talk about how to set up your budget system, plus all the options you've got.
1. Budgeting Printable
The easiest way to get kids starting with budgeting is to give them a budgeting worksheet and help them fill it out.
I mean, can you imagine them trying to maintain categories and not spend all their money over two whole weeks or 30 whole days? Some kids can do this, but not many.
Then, the following next week, have them fill a new budget worksheet out.
And the following week, fill it out again.
You just keep them on this path – filling it out, trying to stick with it, then doing it again – because the lessons are in the actual doing.
What They’ll Need to Fill Out a Kid Budget Worksheet:
- Income of Some Sort: “Income” can mean many different things. Could be birthday money, and you can fill out a budget sheet with them just for that. Could be a consistent allowance, or inconsistent chore commissions (based on how motivated they are).
- Expenses: “Expenses” for a kid usually looks more like “wants”. And that’s okay! I mean, it’s not like they’ve got electric bills to pay, right? Getting them to “plan” even a few hours ahead of time what they want to buy at a store is a start in the right direction. Help them fill in this area with planned spending, so that they make fewer impulse purchases (over time). Don't forget about whether or not you want them to donate any of their money (here's 10 charities for kids to donate to where $12 or less goes a long way).
- Savings: They can either plan for savings (recommended), meaning they choose ahead of time how much of their money goes into savings for the budget period. OR, they can see what’s leftover, then put that into savings. Here's 15 money saving tips for kids and some fun money saving challenges for kids.
Pro Tip: Here’s one thing that is missed when it comes to teaching kids to budget – make sure they’re reflecting on their past budget before creating their new budget. At the end of each week, ask them what things went well? What categories did they overspend? Where did they have to take money from in order to cover other costs? Did their money last the entire budget period?
2. Spending Space
Next up the budget system is choosing how kids will store money they’re going to spend (on a store transaction, to give to other people, at school vending machines, etc.).
They can use:
- Money Envelopes: Here’s some money envelopes for kids I created. You can use them to budget each week, or just for specific store transactions.
- Wallet or Purse: You can use a wallet and/or purse, with the money envelopes, or in place of them.
Either of these will be better than just their pocket (spoken from a person who used to, religiously, lose dollars and coins to the washing machine growing up).
3. Savings Space
Your child needs a place that I like to call a Savings Space – somewhere, or something, that they can use to accumulate money.
This can be:
- Money Jar (Give Save Spend Bank): Here’s the best money jars out there, plus a free money jar printable I created.
- Piggy Bank: Here’s my pick of 21 unique piggy banks.
- Savings Account: Here’s how to setup a savings account for your child.
4. Budgeting for Kids App
You might be wondering if there are budget apps for kids out there. I can say there are, and they’re mostly tied to chore and allowance tracking apps.
Hint: I would advise you teach your child how to budget on paper and with real money, first, before attempting to set them up on a budget app. OR, if a chore and allowance tracking app is what makes sense for your family, then have them still budget on paper off of the app so that they can really play with the numbers and see what’s what.
And here’s a quick rundown of what’s out there, if you’d like to do your own research:
Whew. Okay – that’s the kid budget system. Next up, let’s talk about specific activities you can do to help with teaching kids about budgeting.
How Do You Teach Kids about Budgeting?
Given all that goes into budgeting for kids…how do you teach kids about budgeting?
If you’re not sure how to start, or where to go from where you are, I’ve got some great ideas for you with specific resources.
Of course, we’ll start with the most important way to teach kids about budgeting – having them actually budget for themselves.
1. Budget Worksheets
One of the best ways – if not the best way – to teach kids about budgeting is to actually have them set up and work through their own budget.
I mean, the amount of money lessons they’ll self-discover by attempting to stick to a budget they wrote out will blow your mind.
2. Budget Games
Not only do they get to role play situations, build relationships with other kids, and be better equipped to handle uncertain situations, but their retention rate goes way up.
I’ve got a list of money toys, money games for kids, budget board games, games to play with fake money (here's free printable money for kids), grocery store games for kids, and free printable money budget games you can get your kids started with today – whether they’re a child or a teen.
Psst: here are free financial literacy games for high school students.
3. Budget One-Off’s (Events)
Not excited about having your child budget each week (or worried they won’t follow through)?
Teach kids and students how to budget by giving them budgeting control over a one-off event.
One-Off Event Examples:
- Birthday party for someone
- Classroom holiday party (Halloween, Christmas, Graduation day, etc.)
- Sibling’s graduation party
- Home renovation project
- Family vacation
For the next event you hold at home or in the classroom, go ahead and let your child fill out a budget sheet with the money you’ve set aside for it.
Give them these details:
- Event Details: When it is, specific things you want, how many people are invited, and any other goals you have for the event.
- Event Budget: How much money are you allocating for this event?
- Where They’re Allowed to Shop: Will you drive them to specific stores? Will they be ordering online?
4. Budget Activities
Looking for more budget activities to help your child learning how to budget?
Great – I’ve got some.
Here’s my personal budgeting activity, where each child or student is given a persona with an income and life details. They’ll need to read through this persona’s financial information, and then fill in a budget worksheet based off of it.
THEN, it gets really exciting, when they’re thrown one of several different real-life scenarios. They’ll have to work through how they’re going to pay for it, based on the budget worksheet they’ve filled in (and their finance).
More budget activity resources to check out:
Teaching Budgets for Kids – A Final Thought
As mentioned above, the best thing you can do when teaching budgeting for kids is to actually have your kids and students fill out their own weekly kid budget worksheets. But not only that. You need to have them reflect and answer questions on what they did well in the last week and what didn’t go so hot (plus why). Do this consistently, and pair their budget worksheets with other budgeting activities (like budget games, and budgeting for one-off events), and they’ll quickly pick up on how this whole budgeting thing works.
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