Homeschooling, Money Wise

Teaching Kids How to Budget Money

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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.

teaching kids how to budget money
So what do you do with cash gifts for kids? Teach them how to budget

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.

Teaching Financial Literacy to Our Kids 

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.

Bacolod Homeschoolers Network

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.

teaching kids how to budget money
Dindin found a dress that she likes that’s within budget while Siobe got the Shopkins toy she wanted.

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.

teaching kids how to budget money
They had fun shopping for the things we planned to buy.

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?

 


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32 thoughts on “Teaching Kids How to Budget Money

  1. Great practice. Similar to what I do for the boys. I give them a set budget for gifts only on Christmas and their birthdays, and they can spend it however they want. The rest goes to their savings naman.

  2. This is brilliant since it is very important to educate kids about money and budgeting early in life. It will help them create excellent spending habits and the right budgeting attitude which will be crucial as they grow older. Thank you for sharing this wonderful tips, Mommy Sigrid!

  3. This is really useful advice for all parents! It is so important to teach children life skills like budgeting their money. My daughter is 9 years old and we talk about this kinds of things a lot.

  4. Financial discipline starts from a very tender age. It is not a new concept coming across grown ups who don’t have financial discipline. Thus, I find this article worth it! Teaching kids the importance of creating budgets for the amount they get or save up is very important. In today’s era, kids kinda know too much about money thus such skills will come in handy!

  5. Giving the kids options to choose from is so important in teaching them to budget their money. That way they see they have a say and will be able to live with the consequences of their actions!

  6. I learned the value of a dollar early on. It helped me avoid financial pitfalls later on in life. This is why I strive on teaching my children how to budget money.

  7. I do the same with my son, teaching him how to budget his money! I think this is such great practice, especially because for some of the kids that I know, they just get everything they want. They turn out like brats and that’s just not the way to go. Teaching them early about the value of money really helps!

  8. It is so important to start teaching them to be responsible with funds while they are young. Such a smart thing to do, teaching kids how to budget their money! 🙂

  9. I think it is important that children learn from a young age that it is important to understand money and try and budget. After all, it will help them so much in adult life. It is definitely an important life skill.

  10. You’re never too young to learn about money! I remember my parents would make me save my money from holidays but I could do what I wanted with my allowance.

  11. I taught my kids the value of money through example and hard work. They “earned” their allowance. Chores, errands, academic awards were given incentives. It gave them the idea that nothing is free. If they want something, they should work hard for it.

    1. That’s awesome Anne! Yes, money values should be instilled. Otherwise, we will be the ones getting the headache when the time comes.

  12. I love the idea of teaching kids to budget from an early age. I really think it is something they should be learning in school! But it not, then it should be taught in the home. This is such a great post.

  13. This is a very important thing to teach kids and you are giving some really good advice, e.g. to make clear the consequences of spending. As always, I think that here, too, it’s important to be a role model.

  14. This is such a great post and very informative. Loved this kind of article very useful for teaching our kids about life.

  15. I think giving them a bunch of choices is such an important thing in teaching money management or they just don’t know what to do. These are great things to think about when it comes to teaching financial literacy to kids which is essential.

    1. Exactly. It’s empowering to the children when they are given choices and be able to make them on their own. They will also learn to see the consequences of the different choices that they make.

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