Budgeting For Kids
It’s important to teach your children to budget and save their money, but how can you convince your child to budget their money for a rainy day when they can’t plan beyond their next nap?
Younger children will not easily understand the differences between depositing, withdrawing, and saving—but with the proper visual aids, patience, and planning it can be done. Here are some ways on how to give your kids the head start you wish you had and set them up to win with money at any age.
The Correlation Between Work and Money
Do your kids think money comes from an ATM? Or do you know someone with children who think that’s where their money comes from? It’s not an unreasonable assumption for a young child to make if they have not witnessed firsthand the work their parents must do to earn the money they get from the ATM. An important rule to teach your kids, no matter the age, is that money comes in exchange from working. Teaching this early on will enforce a good work ethic in your children as they will work hard to make that money!
Budgets For Kids: Age 2-5
1. Use a clear jar to save
It’s vital to help your little ones see their money grow. One really cool idea is to use a clear money jar. Have your kids fill the bucket whenever they make some money. This will allow them to see their money grow in front of their very own eyes. Tell them that when their money jar fills up that they can pick what they want to do with the money.
The piggy bank is a great idea, but it doesn’t give kids a visual. Clear glass jars are easily available at Chandarana Foodplus & House of Leather.
2. Be a role model
Little eyes are watching you. If you’re slapping down plastic every time you go out to dinner or the grocery store, they’ll eventually notice. Or if you and your spouse are arguing about money, they’ll notice that too. Set a healthy example for them and they’ll be much more likely to follow it when they get older.
3. Show them that stuff costs money
You’ve got to do more than just say, “That pack of toy cars costs KES.500, son.” Help them grab a few shillings out of their jar, take it with them to the store, and physically hand the money to the cashier. This simple action will have more impact than a five-minute lecture.
Budgets For Kids: Age 6-11
4. Show opportunity cost
That’s just another way of saying, “If you buy this video game, then you won’t have the money to buy that pair of shoes.” At this age, your kids should be able to weigh decisions and understand the possible outcomes.
5. Give commissions, not allowances
Don’t just give your kids money for breathing. Pay them commissions based on chores they do around the house like taking out the trash, cleaning their room, or washing the dishes. Dave and his daughter Rachel Cruze talk a lot about this system in their book, Smart Money Smart Kids. This concept helps your kids understand that money is earned—it’s not just given to them.
6. Avoid impulse buying
“Mom, I just found this cute dress. It’s perfect and I love it! Can we buy it please?” Does this sound familiar? This age group really knows how to capitalize on the impulse buy—especially when it uses someone else’s money.
Instead of giving in, let your child know they can use their hard-earned commission to pay for it. But encourage your child to wait at least a day before they purchase anything over KES. 1500. It will likely still be there tomorrow, and they’ll be able to make that money decision with a level head the next day.
7. Stress the importance of giving
Once they start making a little money, be sure you teach them about giving. They can pick a church, charity or even someone they know who needs a little help. Eventually, they’ll see how giving doesn’t just affect the people they give to, but the giver as well. If you have a super gracious child who wants to give most of his money and spend very little, it’s best to encourage more of a balance.
Budgets For Kids: Age 12-18
8. Teach them contentment
Your teen probably spends a good chunk of their time staring at a screen as they scroll through social media. And every second they’re online, they’re seeing the highlight reel of their friends, family and even total strangers! It’s the quickest way to bring on the comparison trap. You may hear things like:
“Dad, Mark’s parents bought him a brand-new phone! How come I still have this hand-down?”
“Mom, this girl at school got to spend KES. 10,000 on her birthday party. I want to do that too!”
Contentment starts in the heart. Let your teen know that their phone (although not the newest on the block) is still functioning well enough to get them to access educational material online. And you can still throw a memorable, milestone birthday party without spending a chunk of your retirement savings funding it!
9. Give them the responsibility of a bank account
By the time your kid’s a teenager, you should be able to set them up with a simple bank account if you’ve been doing some of the above along the way. This takes money management to the next level, and will (hopefully) prepare them for managing a much heftier account when they get older. Come on over to Ridgeways Mall & begin their journey with Co-op Bank’s Childrens’ Account (https://bit.ly/2Ppzikv) or Equity’s Junior Member Account (https://bit.ly/33thDAA).
10. Teach them to steer clear of student loans
Before your teen ever applies to college, you need to sit down and have the talk—the “how are we going to pay for college” talk. Let your teen know that student loans aren’t an option to fund their education. Talk through all the alternatives, like working part-time while in school, and applying for scholarships now.
11. Get them on a simple budget
Since your kid is glued to their smartphone anyway, get them active on a simple budgeting app(Check Playstore or App store). Now is the time to get your teen in the habit of budgeting their income—no matter how small It is. They should learn the importance of making a plan for their money while they’re still under your roof.
12. Help them figure out how to make money
When you think about it, teenagers have plenty of free time—April break, August break, December break…and right now they are full time at home. If your teen wants some money (and what teen doesn’t?), then help them find a job. Better yet, help them become an entrepreneur! These days, it’s easier than ever for your teen to start up their own business and turn a profit.
As I sign out…
Teaching your kids about money at any stage is going to take time on your part. It won’t always be easy but if you want them to know how to successfully manage their money when they get older, taking the time now will be worth it.