It’s kind of amazing how much trick-or-treating loot an eager little goblin can snatch up in one All Hallows’ Eve. If you’re dreading the impending sugar buzz and/or worried about cavities for your kids, then maybe, this year, budgeting can save the day.
Consider the lessons that a pile of candy can teach your kids about smart money management. For example, which three pieces would you like to pack for lunch, tomorrow? What candy can you freeze and save for later? And, would you consider giving Mom a Reese’s … or two (pretty please)? Planned spending, saving and giving—check, check and check!
And it’s so cool to see how naturally good kids are at prioritizing and making those choices. It just goes to show that you’re never too young to begin learning the skills that will help you win financially. You just have to keep it simple and relatable.
If your kids are ready to take it a step further (if they’re at least eight), then why not help them start their very own budget? If you’re already using YNAB, you can set them up with a new budget for free under your account. If you don’t use YNAB, you should definitely try our free, life-changing, 34-day trial. And, of course, you could use a notebook or spreadsheet, too.
Here are three lessons to keep in mind:
1 – The Difference Between Income and Allowance
Just like with adults, in order for kids to budget, they need to have money. You might be inclined to require them to earn it by helping out around the house or doing yard work but, according to Ron Lieber, a New York Times columnist and author of The Opposite of Spoiled, that’s not the way to go.
See, there’s a difference between teaching kids how to earn money and teaching kids how to manage money. And, furthermore, helping out around the house is a duty that the entire family should share, kids included. Everyone does chores! You don’t get a reward for doing what’s expected, you just do it.
And allowances? They serve a very important purpose—to let kids experience having, spending, losing and saving money (and all of the corresponding emotions). If your child fails to do chores, you wouldn’t take away their school books, right? Ron suggests that, for the same reason, you shouldn’t take away their allowance, either.
But How Much?
There’s no right amount of allowance to give your kids. Obviously, it’ll depend on your budget. Just pick an amount that works for your family, and be consistent.
Jesse shares tips for teaching your kids about money and budgeting in his book, and he said, “Julie and I decided on $5 for Porter (age 12) and Harrison (10), $3 for Lydia (8), $2 for Max (7), and $1 for Rose (5) each week.”
2 – Money Has Three Very Important Jobs
When allowance day rolls around, show your kids how to allocate their money across the three primary categories—giving (10 percent), saving (45 percent) and spending (45 percent), in that order. Don’t just do it for them, either. Whip out your calculator and show them how the math works out.
So, why 10 percent to giving, and why is that first? Teaching kids to give is important for many reasons. It teaches them empathy and selflessness. And it serves as a regular reminder that with money comes power and a responsibility to seek justice for others! As they say, your heart will follow your money, so make your children give, now, and watch them grow into naturally more giving adults.
Once they’ve set aside money for giving, have your kids split the rest of their money between saving and spending. Saving teaches discipline and they’ll thank you for it (one day), and spending, well, that’s where this gets fun …
3 – How to Prioritize Spending for Maximum Happiness
It’s important to empower your kids to make their own spending decisions but, before they drop a dime, grill them about what they really want. Ask them to make a list—what’s their favorite toy? What do they eyeball every time you go to Target? What toy do they gravitate to at their friend’s house? Push for more and more ideas until you’ve exhausted their imagination.
… then you have them check their available spending money. This is where their priorities surface, and fast. Allowance money will only go so far, so ask them, “What’ll it be?”
This part will be hard, especially if you’re frugal, because kids don’t always make the wisest choices. But that’s also why you have to let them do it! In his book, Jesse recalls the time that his son gladly dropped $80 of birthday money on a LeapPad, a toy that he quickly lost interest in a couple of weeks later. He cringed at the waste of money but, as Jesse pointed out, the purchase wasn’t about the LeapPad, at all. It was about the experience and lesson learned.
Let your kids practice making their own decisions, now, and they’ll be better at it for life!