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Wondering how to introduce the essentials of budgeting to your kids?
Although your kids will learn the basics of money in school like calculating change and using coins, they likely aren’t learning the fundamentals of a good budget in the classroom.
So, as a follow-up to our post last month on how to teach your kids everything they need to know about saving money, this week we’re revealing our tips for teaching kids how to their budget their money.
1) Initiate a Conversation
Starting a conversation about money with other adults is one thing - but starting one with your kids (who may have limited knowledge of the concept of money depending on their age) presents a whole other set of challenges!
To make things as easy as possible for your child to understand, use an example they can relate to. For example, food is a necessity which we have to buy - so explain to your children that a budget allows you to work out how much food you can afford to buy. Essentially, the goal is to help them understand the benefits of budgeting: budgeting is a plan that helps people make the best use of their money.
2) Define Wants vs. Needs
Helping your child learn the differences between a 'want' and a 'need' will help them prioritise how they want to spend their money. For example, a new school uniform would fall into the Need category, whilst a new toy or game would be one for the wishlist.
3) Outline the Process
Detail the budgeting process by explaining the concept of income. As younger kids typically won't have a regular income, you can use your own as an example, or any income they receive from an allowance/gifts from relatives.
Have your child add up their total income from a week or month, then have them write down all expenses - including needs and wants - for that time.
The Balance Money then advises the following:
"Next, have your child subtract their expenses from their income. If the number is positive, congratulate your child and explain they have enough money to meet their needs and wants. If it’s negative, explain that they will need to earn more income to meet their goals, or that they need to cut expenses."
4) Set and Complete a Goal
Finally, give your child's money - and budget - a purpose.
Aligning your child's financial goals with their passions e.g. gaming or art will help them stay focused and motivated when creating their budget. Make this fun for your child by creating a visual reminder for them of their goals e.g. a chart they can colour in to measure their progress.
BONUS TIP: Use the ImageNPay Family app to help your child gain financial independence with their very own prepaid card. Each card comes with a balance that you, as the parent or caregiver, can set limits to.
Your child can also send top-up requests if they run out of money, and you can view all transactions to monitor their spending in real-time!
To discover even more about ImageNPay and the benefits of joining ImageNPay Family, tap the button below and download FREE on App Store and Google Play today!
*Credit to The Balance Money for these great tips