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5 tips for budgeting and setting money goals
We all want our kids to grow up to make smart financial decisions. Part of the puzzle is developing the essential skill of budgeting – because as the saying goes, money doesn’t grow on trees.
Developing an understanding that life can be a bit of a balancing act is the first critical step. From there we can teach them spending, saving, budgeting and setting money goals is all about balance. Here’s five practical tips to help you bring balance habits early on.
1. Short-term versus long-term savings goals
A good place to start is by discussing short-term and long-term savings goals.
By using relatable examples like saving for a doll versus savings for a dollhouse or video game versus a gaming console, try and encourage kids to think about how long it would take to save for each item. This helps them understand the importance of planning, timing and balancing spending against saving.
2. Getting started with budgeting
Kids love games and activities, so with that in mind, making a game or an activity out of developing a simple budget planner can be a fun way to start.
As they begin to become more responsible for managing money and expenses, like getting pocket money for doing chores and then deciding the best way to use it, they need to learn that money they get needs to be budgeted wisely. It’s a fantastic first step in equating earning money, saving money and spending money – it’s also handy in helping them to not think of you as an ATM.
3. Taming teen spending
As kids grow to be teenagers they may also start earning money through part-time jobs.
This is an excellent opportunity to teach them about budgeting for more significant expenses like outings with friends, clothes and phone bills. A good foundation now will help them prepare for financial independence and responsible money management in the future. This will be a learning curve for most kids and don’t worry too much if the earn/spend/save balance isn’t right early on – sometimes the best way for anyone to learn is to get it wrong.
4. Taking the impulse out of buying
As you know, impulse buying can lead to financial trouble down the road.
To help kids avoid the impulse trap, get them to think about how much time and effort they need to put in to earn the money for those trendy kicks or ritzy new mobile phone or item they simply have to have. It just might encourage them to prioritise their longer term needs over short-term wants.
5. Why avoiding debt is the best trend
Teens might also be tempted to go into debt to keep up with the latest fads.
By teaching them to set goals and manage their money responsibly however, you can also equip them with the tools to avoid getting into debt as they get older – an essential life skill that will serve them well throughout their lives.
More fun ways to learn
Money might be a serious subject but learning about it can still be fun.
Here’s some more ideas for teaching kids and teens about money.
- DIY money jars. Turn old jars into money jars labelled Save, Treats, Clothes, etc. This project helps kids visually divide their money and reinforces good money habits.
- Budget calculator and planner
Assist your kids with our budget calculator and Moneysmart’s budget planner so your kids can easily work out what they earn and spend – and could potentially save!
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