Budgeting is an important skill and habit. We should teach our children about budgets as soon as they can understand. They should be working with their money from the first day that they receive an allowance or compensation for chores. The sooner they learn to respect money and work with it in smart ways, the better. If you have a money-savvy child, you won’t have to worry about their financial independence when they get older.
How to teach budgeting:
Use building blocks or toys to explain earning and spending. You can also make it real by giving them their allowance and taking them to the store to buy something. When they see their money go away in exchange for something they want, they will learn that money spent is money gone until you earn more.
If your children are in school and can read and write, teach them to draw up a budget. You can now let them have their two columns of income and expenses. It doesn’t have to be super complicated. They just need to understand that money doesn’t grow on trees and that when you spend it, it is gone. They also need to realise that they should never spend more than what they have.
Let your children pay for their own toys at the store. It helps with understanding money matters when your child has to choose their own toy and make sure that it is something they want to spend money on. When they need to pay for it themselves with the money they have, it makes spending more of a reality.
You can also bring in lessons about saving. Explain that some of the money they earn must go into a savings jar or piggy bank. Help them understand that what they save they can use later for something that they really want.
Every child will learn in different ways. As a parent, you need to find the right tools and ways to explain about money and how to use it in smart ways.