Money can be a complicated issue to discuss with kids, but it’s a necessary part of life they need to learn about. With the current financial difficulties many people are facing today, helping them develop budgeting skills at an early age may help them obtain financial security when they’re older.
Whether you’ve already begun to explain money to your children or you aren’t sure where to start, it’s important to have an ongoing discussion about finances with your kids. Here are some tips on how to teach your kids about budgeting that will make money easy to understand and set them up for success as they get older:
1. Financial Responsibility
While you don’t need to (and probably shouldn’t) actually use the phrase “financial responsibility” when teaching your child how to budget, it’s one of the first things you should talk about. Budgeting is all about being responsible; you have to make smart choices and work hard to maintain a budget successfully.
Your child is likely already familiar with the concept of responsibility, making this a great starting point when you begin to talk about money with them. Use that to your advantage when talking about budgeting. You don’t have to start from square one. This is an opportunity to expand upon their knowledge of what responsibility is and apply it in a new way.
2. Elmo’s Three Jars
Instead of a traditional piggy bank, set up three glass money jars for your children to store money in — one for saving, one for sharing, and one for spending. Popularized by Elmo from Sesame Street, this method teaches children about the importance of saving, introduces the practice of charitable giving, and still gives them flexibility to make purchases for themselves.
As an added bonus, the clear jars allow kids to literally see their money grow. What was once theoretical and abstract is now tangible and visual. They will be able to concretely understand that their funds are split between spending, saving, and sharing. Seeing the money physically grow can help get kids excited about saving money and make the process more enjoyable for them.
3. Delayed Gratification
Another key aspect of budgeting is delayed gratification. You have to teach your children how to make smart decisions about their saving and spending habits. While they may want to spend all of their money on the latest gaming console, remind them about their savings goal. Whether it’s putting money away for college or saving up for a new bike, explain that they have to be patient now in order to get their reward at a later date.
In the throes of a tantrum over not being able to afford a new toy at the store, you may be tempted to throw all of that out the window. However, especially at moments like these, it’s important not to cave. Help your child stick to their financial goals, even if they don’t want to. They made a commitment, and it’s important for them to honor it. They’ll learn about why they need to spend their money wisely and carry that discipline with them into adulthood.
4. Minimal Living
Teach your children by example and try to embrace minimalist living. Let them know that not everything is replaceable with the swipe of a credit card and that just because you have money doesn’t mean you have to spend it. Focus on saving up for treats and presents that are about experiences, not things, like a trip to the zoo or a concert.
By showing them how to shift their focus away from material goods, you can try to curb the societal influences that encourage them to constantly consume. Remind them that money doesn’t actually buy happiness. They’ll also grow to appreciate and care for the things they do have and will learn that there’s more to life than money.
Teaching how to budget is only one part of a larger discussion about money and finances that you need to have with your kids, but it is an important part. As with most other parts of parenting, it won’t always be easy, but the work will be worth it to see your kids grow up to successful, financially stable adults.
Avery T. Phillips is a freelance human being with too much to say. She loves nature and examining human interactions with the world. Comment or tweet her @ataylorian with any questions or suggestions.