It’s never too early to begin teaching your children about budgeting wisely. Knowing how and when to introduce smart money behaviors and attitudes is another matter, however.
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How early should I start talking about money with my kids?
Of course, every child starts getting curious about money a little differently. When your kids begin asking questions about how “buying stuff” works, it may be an excellent time to start a money conversation.
You can even gauge your child’s “budgeting readiness” by how they play. If they pretend-play going to the store and plunking down a plastic card at their home-made check-out, that’s a green light for a first money talk.
When you do open up a chat, keep it short, sweet, and straightforward. The older your kids are when you begin teaching kids about budgets, the more you can hold their attention with age-appropriate budgeting details.
When money is taboo
For many of us parents, household budgets were not something we discussed much growing up. Disclosing salaries or asking how much something costs may have been considered impolite or private.
While your personal financial information IS private, allowing your kids to have glimpses of how you run the household with the money you have can help them grow into money-savvy adults.
It’s perfectly okay to help your kids know how much things like groceries and gasoline cost, and how much money you set aside each month to purchase them.
Helping your kids understand how much the toys, trips, and experiences they want cost is smart. Showing them how you prioritize those purchases and how you save for them will also help them think carefully about their buying decisions too.
Where should you start?
Many households begin teaching about budgets by using an allowance. As early as age three or four, kids can start receiving a monthly or weekly allowance as a money teaching tool.
A few dollars per week is plenty to begin imparting smart money decisions. Here are three “money buckets” to introduce to your children.
The Savings Bucket
At this age, it’s easy to have your kids break up their allowance equally because they don’t have any expenses yet. Experts recommend having your children save at least 10% of their allowance (or income, as they get older), but if you give $3 per week, for example, $1 can go into a piggy bank.
When your kids understand that they must save up for the more significant items they want or have special experiences, they help them develop financial patience. Practice with saving money at a young age may help them avoid impulse purchases later on.
The Giving Bucket
Helping your children be generous with money toward causes or people they care about is good practice at “humaning.” Designating a separate container for this part of their income helps them to prioritize and gain joy from sharing their financial resources.
At an early age, allocating one-third of their allowance to The Giving Bucket is totally fine, but 5 percent is also a good marker if your kids are older.
The Spending Bucket
Having money should be fun! Spending money feels powerful for children (and for adults, let’s be honest!) They can make choices about their purchases (within reason) and feel good about their spending power when it’s used wisely.
Try asking your kids about an inexpensive toy they want, a treat they like eating sometimes, or a clothing item they’ve been eyeing for awhile. Help them know how much each item costs, and walk with them through their impulses to buy.
Let them buy some of the items they want. Then, after the purchase, you can help your kids connect their feelings to their purchases, and whether it was a good “buy” or not. For example, if your kid buys a toy, you can ask them in a week how much they played with it.
You can use their answer to help them decide whether and how to make future purchases that provide true enjoyment over quick-fix gratification. Also, sometimes it feels wonderful to plunk down cold, hard cash for something you want RIGHT NOW. Balancing those purchases with waiting out your impulses is part of intelligent money behavior.
Provide real-world budgeting experiences for kids
A fabulous place to learn money skills is at the grocery store. Share with your school-aged children how much money you generally spend on groceries each week. Then, let them accompany you on your next grocery trip.
You can cruise the aisles together looking at breakfast cereal prices, meats, produce, dairy, bread, and treats.
It’s helpful to show kids that sometimes the treats they like can get expensive, while healthy foods can also be delicious and budget-friendly. You can also teach your littles how you balance every family member’s favorites into the entire purchase.
When you can, shop local. You’ll be teaching your kids the value of investing in your own community and helping out your neighbors. Win-win!
Get help from a planning resource
In our digital age, there’s ALWAYS an “app for that.” Teaching kids to budget is no different. Check out Busy Kids to help your kids track their chores and how much money they earn helping around the house.
Bankaroo is a virtual banking platform designed to teach kids about money in a safe environment. Through age-appropriate games and other tools, kids learn to set money goals, develop their understanding of how money works, and save for the stuff they want.
Whatever resource you choose, know that you don’t have to be an expert on budgeting to help your kids learn money skills they’ll have forever.
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