Here are 4 tips for helping your child budget like a pro – whatever their age – so it becomes second nature as they approach adulthood.
1. Make it fun
Budgeting is part of your everyday money management, so make it part of theirs too. Children learn from you and love playing games – so combine the two.
Shopping games are great for children (both real and make-believe). Create a shopping list, look at the price of each item, add the prices up, then compare the total with what you’ve actually got in your wallet or purse.
This helps children realise that everything has a cost and that sometimes they may not be able to afford what they want to buy. Once they understand this, it’s a good idea to introduce budgeting – one of the most useful skills they will ever learn.
2. Keep track
It’s really important to teach your child to keep track of their money. It’s key to great budgeting.
Knowing how much money is in their money box or bank account and what’s left when they take money out is a great starting point.
Once they’ve grasped this concept, you could introduce the idea of setting a savings goal so they get a sense of forward planning and start estimating how much money they’ll need to save up to buy something.
3. Set a savings goal
Your child may have an idea of what something costs, but may not have a clue how much they need to save to buy it. This is a great time to set a savings goal – it’s an excellent way to motivate children to save.
Explain the importance of setting a certain amount of money aside each week, and how many weeks it’ll take before they can afford their goal. Even better, teach them how they could buy it quicker if they save more each week or do chores to earn more pocket money.
4. Teach them the implications of over-spending
At some point, your child might spend all their pocket money, meaning they can’t buy something as a result.
This is an important lesson in itself. It’s an experience you may be tempted to bail them out of, but that may not help them in the long-run.
Instead, you could explain what they could do differently next time. Introduce the idea of comparing prices (could they have bought things cheaper, or resisted the impulse to purchase?) and what they can do to earn more pocket money.
For children to learn about budgeting, they need to take control of their money. Knowing what money they’ve got, what they’re spending it on, and how they can earn more are important stepping stones towards developing strong savings and budgeting habits.
