How To Teach Kids the Basics of Budgeting and Spending Responsibly

Budgeting and spending responsibly aren’t skills that should be developed later in life. Money knowledge is on the same plane as reading and being polite. By instilling positive, responsible spending habits, you’ll set up your kid (or kids) for success.

Set an Example

There’s no doubt about the fact that kids are great observers and absorb what’s going on around them. So, be cognizant about how you talk about money and how you actually spend money. When it comes down to it, practice what you preach.

An Allowance

In the world of parenting, allowances are extremely common. However, they are about more than just simple cash every week. Make an allowance something that is earned from doing chores/homework, not something that is a given. If they aren’t good or tasks aren’t completed, don’t give an allowance. This shows kids the connection between doing work and receiving money.

Additionally, you can also use allowance money and birthday/holiday gifts to form a mini bank. Let them know how much money they have. You could keep the information in a notebook or maybe display it on the fridge, so it’s visible.

When they want to buy something, like a toy, have them look at the cost of it. Then, have them compare the cost to the amount of money they have. In order to help them make educated choices, help them set goals. Good questions to ask include:

  • What do you really, really want? Based on its cost, how many weeks would you need to save to get it?
  • Is there anything you can do to get to your goal quicker, like a lemonade stand or additional chores?

It can be helpful to keep the money that accumulates in two jars: spend and save. Instead of the traditional opaque piggy bank, try something see-through, so kids can visually see money adding up.

Apps/Games

For young kids, it may be difficult to tell the difference between game currency and actual in-app purchases. A good amount of parents have been surprised when they’ve been charged for in-app purchases when their kids use their tablets.

A great lesson revolves around the difference between play money in games and actual currency. Oh, and it doesn’t hurt to block in-app purchases, either.

Real Budgets

As kids get older, they can handle more complex information about money and finances. Of course, you probably don’t want your kids to know the ins and outs of your personal budget, but what can you share? Think it over by yourself or with your spouse, and share what you feel comfortable with.

Explain your thought process and let your kids know when you’ve run into challenges. That way, they’ll be able to see that budgeting isn’t a black and white process, and it can be difficult sometimes – beyond just buying a recreational item.

At the end of the day, whether you’re a mom or a kid, budgeting is difficult. There is always more to learn (after all, that’s probably why you’re reading this blog!). Emphasize this to your little ones as they grow up into young adults, and you’ll be sure to see them flourish financially.

Top 5 Money Tips For New Parents

A new member of the family means a lot of things, from new experiences and memories to new fears and frustrations, chief among them the fact that you now have to stretch your money to completely support a new person.

Budgeting for a family is no small chore, especially if you’ve never had to do it before. It doesn’t have to be difficult or intimidating, though. By following these 5 money tips for new parents, you can get your new family’s finances off to a solid start in no time.

Establish An Emergency Fund ASAP

You’re probably concerned enough with just covering the day to day expenses when it comes to your new family member. Savings, beyond what you may or may not have automated, might not seem like a primary concern from the beginning.

It should be, though. It’s recommended that you have six months’ worth of non-discretionary income set aside to make ends meet should something happen to your earning ability. It’s not always fun to think about losing your job when you have a new baby, but it does happen, and if it does, your family needs to be ready.

Try to have enough to cover half a year’s worth of basic living expenses, including rent or mortgages, utilities, bill payments, food, and baby expenses such as diapers and new clothes, set aside in advance. Whether you’re getting this set up before baby comes or you’re starting after the fact, worry about this before you start worrying about college funds or pre-school tuition. Those things are important, but so is your family’s living security.

While you’re at it, take a look at life insurance. It may have been frivolous when it was just you or just the two of you, but now that someone is going to be depending on your income for several years to come, life insurance is an important security measure to make sure that your child is cared for in tough times.

Evaluate Your Primary Expenses

Next on our list of top 5 tips for new parents is to take a look at how much you’re spending on the necessities.

You know that adding a new person into your family budget is going to change things, but have you truly considered by how much? Remember, you’re not just going to need to buy one wardrobe’s worth of baby clothes that will last until they reach their toddler years, you’re going to need to re-outfit that growing body every couple of months.

There’s no one number that’s going to tell you how much extra your kid is going to cost you, and you’re going to have to be prepared for your budget to not go exactly as planned, but it’s important to look into the potential cost of raising your child, and evaluate your budget from there. There are even a number of online calculators to help you get started.

When you know how much you need for your child, you’ll be in a better place to decide how the rest of your budget should be allocated. Necessities like food, shelter, utilities, etc., aren’t going anywhere, but you’ll be surprised where you’ll be able to cut back.

Look Into Alternative Options

Once you know where you absolutely must spend and where you can cut costs, don’t be afraid to look into alternatives where costs are still high.

New parents are easy targets for advertisers because your time and mental resources are already pretty tight, but the newest or flashiest isn’t always going to be what you need. Buying gently used on things like furniture and clothes for your new kid is a good way to cut some of the initial costs that are only going to last between a few months and a couple years.

Look into alternatives for things like health insurance, too. Increased premiums might make employer benefits a costly addition to your budget. Government-backed coverage might save you some cash while still keeping your whole family healthy. If you do run into emergencies with your budget, there are options such as collateral loans that you can look into.

Look Into Tax Advantage College Savings

You might need that safety net first, but saving for college should be something that starts early. With estimated costs at a quarter of a million dollars by 2030, college isn’t going to come cheap and it’s not going to happen on its own.

Options like a 529 College Savings Plan provide parents a chance to save without the savings being subject to federal and in most cases state taxes, meaning that you’re getting a full dollar for every dollar you put in.

Don’t Hesitate To Ask For Help

When you’re tired, stressed, or just don’t know what to do, loading up on hundreds of dollars’ worth of baby books and paying for top notch sitters and nannies won’t get you nearly as far as your own network.

Don’t be afraid to ask for help from your supporters, whether that’s other new parents, your own parents, or other friends and family. If you need a sitter or help getting your kid to an important appointment, talk to someone you trust with your kids. Often, they’ll do it for nothing more than the promise that you’ll return the favor down the road.

Don’t be afraid to ask for advice, either. Things like medical needs should never be overlooked but a seasoned parent might be able to reassure you that a red spot is nothing more than diaper rash and save you the cost of a copay that you didn’t account for. Remember, it takes a village.

There’s no set number when it comes to budgeting for a growing family, and there’s no definitively right way to do it. Just set your priorities, look at all your options, and don’t be afraid to take help where you can get it. Most of all – don’t be afraid to not be afraid. You’re going to be a great parent.