How to Budget Money for Kids
Here are some simple things to do to introduce the kids on the concept of how to budget money.
Our kids, now ages 8 and 4, have been exposed to the concept of money ever since they started to talk. We are pragmatic people and we also would like our children to exercise prudence. Read our story in the link below.
One of the aspects of financial literacy for us is learning how to budget money. A lot of people do not have the faintest idea of budgeting, which is the reason why we have grown-ups who are one-day millionaires.
When Kids Get Hold of Money
At some point in their young lives, kids will encounter money. It can be in the form of allowance, prize for their achievement, or gifts. Since we are homeschooling in Bacolod, our kids do not get allowance.
But they do get money gifts on their birthdays, Chinese New Year, and Christmas.
And so last December, the kids got some money gifts from family and godparents. The first one that they got was P3000 from their Lolo Tito, which means they get P1,500 each. So here’s what we did.
Teaching Our Kids How to Budget Money
Here’s what we did with their Christmas money. The steps are just simple, so you can do it with your kids easily. If you have other helpful ideas, please share them in the comments below.
Tell Them How Much Money They Have
The first step with budgeting, both for us and for kids, is to know how much money you have. The kids knew that, along with where it came from, before we did anything else. For this particular purpose, they know that each of them has P1,500.
Let Them Know that Things Cost Money
The kids need to know that all their things, including food and vacation, all cost money. Like our recent vacation in Hong Kong, the kids saved up for it for years before they finally got on the trip. They just kept putting money in their coin bank. They should not be made to believe that Papa and Mama just get things from the mall or the supermarket but that we buy them with money.
Part of budgeting is teaching them about needs and wants. It is not practical to just tell them to save their money because that’s not reality. We all need to buy stuff that we need or like. It’s a matter of knowing how to use money properly.
Give Them Choices
We told the kids that they can spend some of their money and they can keep the rest. We asked them what they wanted to buy while being prepared if they have some outrageous plans (last year Shane wanted to buy a car and a tricycle). Dindin decided on a dress because she said she “needed” it. She is growing fast and we realized last November that a lot of her dresses have already become too tight.
Meanwhile, Shane didn’t really need anything so she was allowed to buy a toy. And she chose Shopkins.
Carrying Out the Plan
So Dindin decided on buying a dress, as it is a current need. I asked her how much we should set aside for the dress. She decided on P300. As for Siobe, she only wanted the two-piece Shopkins, which costs P149.75.
With this plan, we went to The SM Store. Since Dindin had a budget, we only scoured the discounted dress racks. We found several that were anywhere from P300 to P350. It was kinda difficult looking for what we liked, what would fit our budget, and with a size that was perfect for her. But we were determined and we finally found the perfect one at only P300.
As for Siobe, it wasn’t hard, as she just picked a Shopkins blind bag.
Lay Down the Consequences of Each Choice
Now, the kids were able to buy what they liked and within the budget they set. After that, what happens?
So I told them that from their P3,000, they spent a total of P450. They still had P2,550 left and they decided to save it for travel and for their college fund. Dindin decided that P1,000 shall go to their travel fund while the rest will go to their college fund. And that is exactly what we did.
All these steps just mean that they are responsible for their money. We can just easily go shopping with all their money gifts, but we opted to teach them how to budget money this way. We still had fun shopping and they enjoyed their purchases while still having some money left.
The kids received more money the rest of the holiday season. But since they already got what they wanted, they didn’t ask to buy anything anymore. We decided to keep the rest of their money instead and divided them between travel and for their education.
How about you? Can you also share some tips on teaching kids how to budget money?