Budgeting for Children
Teaching children about money and budgeting at an early age will be beneficial for them later in life. When your child receives money for allowance, gifts, chores, babysitting, etc, you can help get them started with simple budgeting concepts.
First, sit down with your child to talk about money and how to use it wisely. Talk about their goals for their money. What do they want? What do they need? There may be short-term goals they can be purchase right away, or they may have long-term goals that will require them to save over time. It is helpful for children to have a reminder of why they are saving and why they should not spend all of their money now.
"Save, Share and Spend" is a budgeting method for children where they set aside money toward each of these three categories.
Save. When your child earns money, they should first set aside a portion for Savings. The general recommended is to save at least 10% of earnings, but this percentage can be increased for children because they have fewer fixed expenses. Savings can be accumulated in many ways, using a jar, piggybank or even a joint bank account to gain interest. The savings account should be kept for emergencies (new bike tire) as well as longer term goals (first car).
Share. Teaching children about charity at a young age is also beneficial. Allow them to research and contribute to a charity or fundraiser of their choice. Sharing is typically around 10%. Discuss options with your child to determine which charity they may enjoy helping. Also consider making arrangements for them to volunteer with that organization to see the people or animals they are actually helping. For example, it can be very rewarding for children to use money to purchase toys for a local outreach center, and then to help pass out those items out to needy families at Christmas.
Spend. The remainder of their earnings can go toward spending. The spending category is available so your child can make purchases they choose, but remind them that additional savings will help them reach their long-term goals faster.
It is helpful for your children to see how you budget, but start small. For example, allow them to help you plan the weekly grocery shopping. Start by planning a list from sale flyers and coupons, and then stick to that list at the store. This can turn into a saving game for them. Remember, children will learn from your example. So telling them about budgeting is important, but it's much more impactful if they see you following a budget yourself.
Teaching Kids Fiscal Responsibility