July 24th, 2014

Teaching Kids to Budget

156792313Most kids – 59% – feel they could be smarter about money, according to a 2014 survey from broker T. Rowe Price Group. Summertime offers the perfect opportunity to develop your little one’s knowledge about topics like budgeting, saving and spending. Here are some engaging and fun activities that help teach valuable financial lessons.

Ages 3-5: Learn about making choices

Even if it’s just choosing between cereal or eggs in the morning, your youngster is already making lots of decisions by the time she’s three years old. Understanding the trade-offs behind these choices is an important part of learning how budgets work.

The next time your child asks for a treat at the store, help her hone her decision-making skills by giving her options. If you know of a coming sale, for instance, and your little one asks for an art set, offer to either buy her a small set now or a bigger one when it goes on sale and the price drops. Encouraging your kid to be patient can help her make better choices and build better budgets later on.

Ages 6-7: Start budgeting an allowance

As your child’s money sense develops, age six is often a good time to start giving him an allowance, according to children’s finance expert Mary Hunt. Help him manage this income more effectively with a simple three-part budget.

Set up three jars with slots cut in the tops. Label one each for spending, saving, and sharing. Let your son decorate the jars with drawings of his goals for each category, using blank address labels. The pictures will serve as visual reminders of why he’s putting his money in the containers.

Ages 8-12: Open a savings account

Younger kids may have reservations about putting their cash into a savings account, but by the time they turn eight, most have become more comfortable with the idea, according to family finance guru Janet Bodnar. To give your daughter a head start, help her open a youth savings account.

Make the trip to the credit union to set up the account into a fun family outing. Encourage your child to ask questions about the terms of her account and its benefits as well as any costs. Actively participating in this process may help motivate her to budget more of her allowance for saving.

Ages 13-18: Balance needs and wants

Since your teen is old enough to balance a checkbook, help him develop his budgeting skills by giving him more responsibility for spending. Asking him to manage some of his living expenses, such as clothing, can teach him how to prioritize his budget.

This year, let your son do the back-to-school shopping. Give him a clothing budget, or if he has a summer job, let him use his own earnings. Before he hits the stores, encourage him to check out online deals and come up with a strategy. Giving your teen the freedom to clothes shop may help him feel more independent and confident about placing needs before wants.

Cherise Fantus, NerdWallet

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