Budgeting for children

A Practical Way to Introduce Your Children to Budgeting; Learn by Doing

The endless lessons a parent teaches a child must include those about money. Starting to teach them about money at an early age and continuing through young adulthood will help form a strong foundation on which your child will build good decision-making skills.

The child can learn about their values and attitudes regarding money if you give them proper and appropriate responsibilities. One of these lessons is budgeting or what we sometimes call a spending plan.

Teaching your kids to work within a budget pays off in the long run.

While younger children benefit from saving for a long-term goal and hearing how you make everyday money decisions, by the teenage years, they are ready to create a spending plan within mutually agreed-upon parameters. Perhaps they would like to be in charge of one part of their spending for a year.

Let’s say that they will assume the decisions and responsibility for their clothing purchases. At the outset, work together to estimate or budget approximate totals for the year, and set regular times to review expenditures throughout the year.

When our family moved to a new location that had different styles for teens, we asked our children to explain what “in” things they thought they needed to buy. One child listed four items of clothing and then had made a spreadsheet listing the prices of the items both locally and by catalog—a practical exercise that certainly pleased us. We as parents wound up learning more from this exercise than the kids!

Regular reviews can be a monthly or quarterly meeting to help your child check on their spending patterns. In these reviews, have your child explain their thoughts regarding their purchases and ask them to express their feelings about these new items. Now that they own this item, do they think it was worth the money? Talking out loud will help them identify their values and attitudes about these purchases. Remember to be gentle with comments and let them explain their values and attitudes. They may be different from your own, and you will all learn about suitable differences together.

In this exercise, you will begin to see the different attitudes that children can have with money. You may have a hoarder, a spendthrift, a giver or one who may refuse to face the limitations of money.

A hoarder likes to see money grow. This may be a good habit for a child, but as an adult, this individual may not be able to be comfortable spending money in an appropriate manner for their lifestyle.

The spendthrift will take any gift of money and know how to make it disappear quickly. As the parent and teacher, your responsibility is to help this child learn to temper this urge and think about longer-term goals and issues. For more on delayed gratification, read our blog Valuable Lessons in Delayed Gratification.

Remember you are trying to teach a life skill. Sometimes these skills are best learned by experiences and mistakes, not by words from the teacher. Children learn best by doing, and this can only be done by giving them a chance and responsibility.

The “learn-by-doing” lesson will free you to enjoy your child and the friendship you can share, knowing that they are gaining in self-knowledge and self-discipline.

Jeanne Gnuse

Jeanne is a co-founder of HTG Investment Advisors Inc. She oversees the firm’s client communications, marketing, and community relations functions. Jeanne is the mother of three children and grandmother to seven. She loves helping others learn money value lessons.

Jeanne received her BS from the University of Dayton and pursued graduate studies at Ohio State University.