Budgeting for Beginners
Newsflash: Budgeting is an important life skill! The earlier kids can understand the basic principles behind budgeting, the sooner they will appreciate the value of money and feel more confident about making spending decisions. With the Holidays rapidly approaching, there is no better time than the present for your child to learn some basic budgeting techniques!
Start with the Basics and Make It Concrete
One of the biggest barriers children face when it comes to understanding budgets is that they don’t have much tangible experience handling money or seeing it for what it truly is….a finite resource. To learn very basic budgeting practices, parents can start by taking out a small amount of cash from the bank or using a stand-in for cash like Monopoly money or even printing practice money (CLICK HERE – Thanks for our friends at HomeSchoolMath for the sample $$ worksheets!). Explain to your kiddo that this is their “budget” – meaning they are limited by the amount of money in front of them. This introduces a VERY important concept that a budget starts from what resources you have available. It can disappear quickly if you are not careful!
Make the Process Feel Real –> Practical Application
Most kids have things they desire – a new toy or video game, a snazzy pair of sneakers, or a cool gadget, or a trendy new outfit. Spend some supervised time with your child researching how much the thing they want costs. Now that you’ve found a good price, have them physically put the money in a different pile with a piece of paper or other note next to it, like “action figure” or “shoes.” Once they’ve moved the money, have them use subtraction or physically count the money they would have left in their budget to spend on other things. This can lead to a great discussion about whether they want to spend all that money on one thing or use their money in a different way.
For Advanced Students, Use Excel
Excel is a powerful tool for both parents and students, and gaining familiarity with it from an early age is a great idea. Basic Excel functions like inputting into cells amounts spent in dollars and then using simple functions like the “sum” function (List of Basic Excel Functions) can immediately and professionally show your child how their purchases are adding up and whether it fits their budget. For even more advanced students, creating two columns – one with the name of the budget item and the other with the cost of the budget item – can be turned into a pie chart (How to Make a Pie Chart in Excel) so they can see how much of their money they are dedicating to one particular thing. Seeing this information clearly displayed in Excel can help young minds better rationalize big life decisions – like whether to buy a Playstation or Xbox!
Budgeting can help your child feel more confident and in control of understanding the limits of money. Starting with something fun – like small items they can buy with a parent-controlled budget – introduces the concept of budgeting in a fun way.