It’s never too early to begin teaching your children about the importance of budgeting. Children as young as toddlers can start to understand the concept of saving and spending. The key is to start early and expand on their knowledge and understanding as they age. Here is a list of ideas to keep your kids engaged in the budgeting process, no matter their age.

Teaching Toddlers About Budgeting

Children as young as two or three can begin learning the concept of giving to others while also learning about the beauty of spending on themselves and choosing items they worked hard to achieve. 

An easy and interactive way to accomplish this is with a three-jar system. Start with three jars or containers and label them.

• Jar #1: Give
• Jar #2: Save
• Jar #3: Spend

The money they put in the first jar is set aside to buy gifts for others or support specific charities or causes. The second jar is for savings or particular goals. The third jar, though, is money they set aside to spend on themselves. Children will learn to love watching their jars grow and using their own money to buy things that matter to them. 

You may choose the amount your children will save, spend, and give. However, a good starting point may be to have them start with 10% in their giving jar, 20% in their savings jar, and 70% they can spend. 

Educating School-Aged Children About Budgeting Basics

Between the ages of five and ten, tendencies will begin to reveal themselves among your children. For instance, you may have one child that is a big spender or one that will give the shirt off his or her back to another. The goal is to shift the “investments” in each jar to encourage the tendencies that don’t come naturally for your child.

If your child is a big spender, encourage them to save more towards longer-term goals. Perhaps your child only saves – never spending a dime. In this instance, you should encourage your child to spend a little more on short-term goals. While saving money is crucial throughout life, your child also needs to be accustomed to parting ways with some of their money, just as they will in the future with recurring monthly bills.

Challenging Tweens with Deeper Budgeting Lessons

The tween years are when much larger incentives come into the picture. Whether you plan to purchase a car outright for your teen and have them pay for the insurance, upkeep, and gas, or you plan to have your teen pay for a portion of their first vehicle, it’s a good idea to start planning in the tween years, so they’ll be financially prepared when the big day comes. 

The same holds true for other major purchases, such as expensive clothing, shoes, sports equipment, cosmetics, and electronics. This is the perfect age to teach your tween about budgeting for specific, larger goals.

Introducing the Concept of Investing to Your Teens

These are the last few years before your teens leave home and begin making important financial decisions for themselves. It’s time to show them examples of the household budget breakdown, encourage them to make their own mobile phone payments, and even begin considering investment options. 

Encourage investing by opening up an additional savings account for your teen to set aside money specifically for investing. After they reach a certain amount (ex: $500), they can put this money into a share certificate and watch their savings grow. A share certificate has set terms, and their money is locked-in throughout their term; if they withdraw the money early, they will incur a penalty or fee. As a result, share certificates are a great first step in investing because they force your teen to save and become accustomed to not touching their investments.

Your Turn

Teaching children to budget money is one of the most important financial lessons parents can offer. It sets the tone for financial success as they grow and become adults themselves. What money lessons have you taught your children? Tell us in the comments!