For The Parents

How to teach your kids about budgeting?

It’s Budget 2020 day and for the New Zealand government and Finance Minister Grant Robertson in particular, it’s an ‘opportunity to reset and rebuild our economy’.  Nothing like a COVID-19 pandemic to fuel a major reset & rethink to the budget our country runs by day-to-day.  While the numbers the government has to deal with don’t fit on an average calculator and the many facets of where money will go i.e health, education, transport etc are vast - why not take the opportunity to teach kids about a budget a little closer to home - the household budget?

 

For many of us, lockdown, alert levels 3, 2 and COVID-19, in general, has meant a tightening of the belt when it comes to household expenses - if not a tightening then hopefully many families have taken the opportunity to rethink and review their financial position.  Do you fall into this camp?  What new things have you learned about yourself when it comes to your spending habits and what do you not actually miss - any surprises? Let's face it, these are unprecedented times, and if money is a little tighter now or in the foreseeable future, it makes budgeting all the more important! Involving your kids in the household budget review is a great way for them to start to appreciate and value money but more importantly, understand all the costs and expenses it takes to run a household. 

New Zealand Budget 2020

Here are our top 5 tips to help you teach kids about budgeting and managing money

1. Be sure to explain why having a household budget is important:

  • To plan for the unexpected (car breakdown) or irregular (domestic holiday) purchases
  • To track money in and out so you can see where dollars are being spent or saved
  • To visit it regularly - update if expenses & other circumstances change e.g. change to a cheaper electricity provider or one of the kids starts an after school gymnastics class

2. Connect the value of money to earning and working hard:

To help motivate kids to save, they need to understand that the money they receive is directly tied to the work they do.  If not already done, why not agree what household jobs could be done in exchange for earning regular pocket money - understanding that time and effort in exchange for monetary reward will help with appreciating the value of every penny earned.  

3. Discuss the difference between needs vs wants:

Perhaps an easier conversation when it comes to supermarket shopping.  Involve the kids in planning next weeks meals and shopping list - can they pick the needs (milk, bread) over the wants (ice-cream, chocolate), do they have any idea on how much things cost?  Can they stick to the budget you set, maybe set them a challenge to save $25 off the bill.  

SAVINGS jar istock

4. Involve the kids in paying a household utility bill and discuss together:

  • Are we getting the best deal - could there be a cheaper option/provider out there for us to find
  • Compare last months electricity bill to the same time last year - you want kids to appreciate what the impact of leaving a heater, AC or lights on in the house can have on the monthly costs. The practice of reviewing and comparing bills can help children understand that their actions have financial consequences - ultimately we want our kids to be smarter consumers with choices.

5. Set a family savings goal for a set period of time:

If kids can take an active role in the decision making of where money is spent it will give them a greater sense of purpose and keep them motivated to play their part in helping to achieve the end goal.  Like earning pocket money, the reward for achieving the family savings target could be a weekend away,  a meal out to your favourite family restaurant or a day trip to your favourite surf beach!

 

While we might not be managing the budget the size of the New Zealand government, our household budgets are no less important.  As parents, we can help our kids build important money management habits and behaviours by openly talking about the household budget and involving them in day to day money-related experiences. These important life lessons and habits learnt now, will be with your kids into adulthood.

Squeeze the Day, start today!