Teach your kids how to budget
Canada Life - Nov 21, 2023
Learning how to budget is a core financial skill that will set your child up for future success. It’s never too early to start.
Budgeting is a key money skill to teach your kids. Making a budget helps your child learn how to plan for the future and to exercise patience. A budget can help your child understand how earning, spending and saving money are connected.
Tips to teach your child how to budget
You can teach your child how to create and stick to a budget through a mix of hands-on lessons and discussions. Here are some tips.
Explain what a budget is
If your child doesn’t know what a budget is, this the best place to start. Basically, a budget is when you write down how much money you earn, spend and save over a period of time. If your child is older, you can be more detailed and explain how you can use a budget to not only plan your spending but also to track your spending and make adjustments.
If your child isn’t getting an allowance or doesn’t have a job, you can still teach them simple budgeting. For example, if they get a gift of money from a relative, you can talk with them about how they’d like to spend that money. You can begin working out a simple budget, writing down how much money they’ve got and the cost of what they’d like to spend it on. You can also use this time to talk about if they’d like to save some or all of their money to put towards a larger goal.
Share the family budget
When your child is familiar with the concept of a budget, you can share the family budget with them. This will help them understand how you make decisions and prioritize spending. Share with them your weekly, monthly and yearly budgets so they can see how it all comes together to address both short- and long-term needs and goals. This exercise can be helpful during tough economic times – it will help your child understand why you may have to say no to some extras you could previously afford.
Do a real-life exercise
Involve your child in a financial decision such as grocery shopping to show budgeting in action. You can take them through every step of the process from setting the amount of money to spend to making a list, checking for sale items and, finally, going to the store. Talk to your child about your decision-making process and ask them for their thoughts.
Start a monthly budget
If your child has a regular source of income, such as an allowance or a part-time job, they’re ready to begin their own budget. I have a worksheet you can use to help your child record their expected earnings and expenses and actual earnings and expenses.
I have resources like a budget worksheet and a SMART goals worksheet you can use with your child. I’m also available to help you if you need support to start the budgeting conversation with your kids. Contact me today.
This information is general in nature, and is intended for informational purposes only. For specific situations you should consult the appropriate legal, accounting or tax advisor.
Canada Life and design are trademarks of The Canada Life Assurance Company.