Ways to Effectively Teach Your Kids About Finance & Budgeting

For many people, finance and budgeting subjects feel daunting and unapproachable. How can you possibly break finance and budgeting into manageable chunks to teach your kids? Surely they’ll pick it up in school and learn everything they need to know that way?

The problem is that our children aren’t getting adequate training in finance and budgeting. Nearly half of today’s college students admit feeling ill-equipped to manage their own financial situation. Kids aren’t receiving the training they need in the school system to be able to effectively understand their money, resources, and finances. This is a critically important set of skills that your children will need down the road.

Don’t worry – it’s actually easier than you think. 

Here are some of the best ways to introduce your kids to the world of budgeting and finances so that they are ready to tackle their own and manage them with confidence when they move away from home.

Start Small: It’s Never Too Early

It’s important to remember that budgeting is a concept that can be simplified enough to teach even very young children. Introducing them to very simple budgeting concepts can start as soon as they are toddlers. Try using a piggy bank or a container for coins. 

Start out by simply having your toddlers help you put money into the container. Similarly, the simple act of having them help you hand cash to a vendor when you’re buying an ice cream or going to the store can begin to introduce these ideas to your young children.

For elementary-aged children, talk to them about the finiteness of resources. Teach them that as a household, you earn a certain amount of money and then spend it on things you need and want. Teach them about savings, how to count change, and the process of earning money in order to be able to buy things. 

As they grow, they will be able to grasp more involved concepts. Starting out with these simple lessons when they are young will make that process much easier and will create a foundation for their finance and budgeting knowledge.

Diversify: Explore the Wide Range of Financial Skills Out There

It’s common to think financial skills consist of being able to create a personal budget. However, an entire array of financial skills and learning areas exist. You don’t need to feel responsible for making all of your children into CPA’s. 

However, if any of your children show particular interest or aptitude for numbers and financial concepts, don’t be afraid to encourage them to explore more of the field. Just like any other natural intelligence, some children will easily take to mathematical concepts and financial frameworks. With a little encouragement and enthusiasm, you can help them explore the wider world of finance.

Make It Fun: Self-Directed Learning

Finance and budgeting concepts can sometimes be more appealing to your children when you turn it into a sandbox rather than an assignment. Sometimes all children need is a direction and the invitation to explore and create. 

Do your kids want to make some extra spending money? Help them come up with some version of a lemonade stand entrepreneurial experiment and support their efforts to make it happen. 

Did they seem interested when you showed them your family budget yesterday? Break out the paper and markers and help them create their own. Encourage imagination. 

Planning a family vacation? Let the kids help you research and plan the trip. 

Creating fun environments can help them take the introductory concepts you’ve taught them and expand them into fun activities you might never have thought up.

Make It Real: Let Them Have Actual Responsibility

The more you can attach budgeting and finance skills to actual, real-world experiences, the better your children will understand the concepts and make them tangible, relatable, and relevant. 

Obviously, these kinds of activities or lessons should be appropriately scaled for your kids’ ages and aptitudes. But allowing your kids to do extra chores around the house compensated at a pre-approved rate or allocating an allowance to each of them only after they’ve created a simple budget to think through how they might spend the amount can be great tools to help them attach the lessons you’re teaching them to their own lives and experiences. 

These activities can make finance and budgeting personal for them and solidify them in a completely different way.

Make It Matter: Skin in the Game

Finally, when teaching your children about the values of financial skills and budgeting, it’s important to consider how you’ll interact with the frameworks you’ve created them to work within. This is especially important as your children grow into adolescents and teenagers and the impacts of their financial awareness and planning are a bit more high stakes.

Parents that bail their kids out on poor spending choices or make themselves into unending, unmonitored sources of pocket cash can sometimes do their kids a disservice in the long run. 

If children’s first experiences with money and financial resources don’t operate like the finite and objective limits they’ll experience as adults, they won’t be sufficiently prepared to plan ahead or work through the realities of poor budgeting, running out of cash, having to take out loans, defaulting on payments, losing jobs without savings at hand, and more. 

Now is the time to help them understand the finiteness of resources, the importance of planning, and how to steward those resources well. 

While they are under your roof and dealing in very small amounts of capital, small lessons that simply result in them not having enough money at the end of the month to go out with their friends because they didn’t budget their spending well will help prepare them for the much harsher realities they might face down the road.