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Budget Skills Can Help Kids Become Financially Secure Adults


It all adds up! Even the nickels and dimes!

Budgeting is critical for financial security, and the earlier kids gain these skills, the better their chances of managing their money successfully as adults. This process doesn’t have to be a dull chore; it can actually be interesting and even fun.

Recognize teachable moments
Countless everyday opportunities arise for teaching basic budget concepts:

  • Food shopping: Introduce the idea of comparing prices and the difference between name brands and generics. Let kids know prices vary and that it can pay to compare.
  • Paying bills: Explain that heat, electricity and cell phones cost money and you have to have an income to pay these bills.
  • Banking: Point out that depositing money in a bank account keeps it safe until it is needed. Help them understand that automated teller machines don’t magically create money at your command.
  • Family budgeting: Let kids watch you set goals and allocate money for daily expenses. Modeling responsible financial behavior is one of the best things you can do to help your kids become financially savvy.

Kids need their own money to begin applying these lessons. Give them a small allowance and the experience of real-world saving and spending.

First budgets
Explain to very young kids that you need money to buy stuff and that most people get money by working. Help children understand the difference between needs and wants.  For example, we all require food to live but that adorable plush snowman he’s screaming for is just a want. Explain that sometimes, we have to save and wait to buy the things we want. To introduce goal setting, help your child create a wish list.

Jars can be good financial organizing tools, with labels such as “spending,” “saving,” “investing” and “giving” to identify intended purposes for the cash placed in each. The spending jar is for little wants such as stickers or glitter pens. The one labeled saving is for longer-term objectives. The investing jar introduces the idea of using wealth to create more wealth. Finally, the giving jar helps kids develop the habit of aiding the less fortunate and worthy causes.

‘Tween’ budgets
Preteens can take budgeting up a notch. As your child’s cash builds, trade up from jars to a savings account designed for kids at a bank like AbbyBank. These accounts impose minimal requirements and fees while paying interest so youngsters can see the benefits of compounding.  Encourage preteens to keep a spending log and a detailed list of savings goals.

Offer your child a fun budgeting experience by putting her in charge of planning a family activity such as a ski trip, a day at a theme park or even going to the movies or a restaurant. Set a spending limit and let him/her research and arrange a trip that fits the budget.

Youngsters can also enrich their skills through any number of fun computer and smartphone apps such as Virtual Piggy Bank, Bee Farming and A+ Allowance.

Budgeting for teens
Encourage teens to find part-time jobs and give them responsibility for some of their own expenses, such as high-end sneakers or cell phone bills. Opening a no-fee, no-minimum balance checking account lets teens handle financial responsibility in an adult way. To keep increasingly complex finances under control, encourage the use of free banking apps.

Thanks to the tools you’ve given them, your children will be well on their way to establishing a secure financial future.


Roberta Pescow, NerdWallet

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