Budgeting for Kids: An Age-by-Age Guide
Teaching kids how to save money is difficult, especially when there are so many temptations to buy everything they lay eyes on. If you can find a way to encourage your children to save and have fun doing it, it will benefit them tremendously in the long run, especially when it comes time to save for college.
In fact, a study by the Center for Social Development found that youth with a savings account in their name were about six times more likely to attend post-secondary school than those who did not have a savings account.
How can you make budgeting for kids fun? We’ve found several helpful tips that can help you teach your child budgeting at any age, while not making it seem like a chore.
How Can I Motivate My Children to Save for College?
Motivate your child to save for college by starting the conversation early in their life. The sooner, the better so neither you nor your child feels any additional stress right before the college application process. Here are some pointers, broken down by age group, so that you can present the concept of saving appropriately.
Toddlers through Kindergarteners
Educating children about money at this age may seem silly, but there are creative ways to do it so they begin to develop basic knowledge during this stage of life. They may not understand the true value of money, but they can start to differentiate between a penny, nickel, dime, and quarter.
What you can do:
Begin by learning name recognition with a coin identification game. Be sure to supervise toddlers when practicing with real coins to avoid swallowing. Preschoolers and kindergarteners can help you clip coupons (using children’s safety scissors!), allowing them to be hands-on. While doing this, you can explain what coupons are and how they help save money.
Reading to children is considered essential for child development because it makes it easier for them to learn about new subjects once they get to school. And it doesn’t have to be just storybooks. You can read them books on any subject including budgeting. This exposes them to the principles early and helps instill the basics of saving money.
Elementary-aged Children
At this time in your child’s life, they may be receiving a weekly or monthly allowance or even gifts of money from relatives for birthdays and other holidays.
What you can do:
This is a great time to take a trip to your credit union or bank to help your child open a youth savings account and encourage them to make regular deposits. Diamond Credit Union offers Youth Savings Accounts and Junior Membership for children ages 12 and under.
Having their own account will help to encourage financial best practices, teaching smart spending that will follow them through all of life’s big moments. Children will see that it’s fun to watch their money grow in their savings account rather than spending it. It also makes saving money a routine part of life as they get older.
Some children are visual learners and having a money-saving chart helps them see how close they are to their goals. Or you can create your own depending on what outcome you want to see. It can be a simple bar chart or possibly one that you pull tabs off of when you reach a goal.
Most children will do something as soon as it’s made into a contest. Who can eat their vegetables fastest? Who can clean their room first? These principles can be used with money. By creating saving money challenges for kids, you’re teaching them while not making it seem like a chore. You can use money-saving charts as part of these contests.
Intermediate through Middle School
As your child gets older, they are able to understand basic monetary terminology such as debt, budgeting, savings, and checking account in a more complex way.
What you can do:
Encourage your child to make wish lists of the things they want. Explain how to create a budget so they can visualize how much they have saved and how much they need to save to satisfy their wish list. You can also show them how to comparison shop, so they develop the habit of taking their time and doing a little research before spending money, ensuring they find the very best deal on a product before spending.
By the time your child is in middle school, you can begin to discuss how much college costs and why having good grades and a college savings account are so important. The average price for tuition and fees at a Pennsylvania State System of Higher Education (PASSHE) for one academic year living on campus is $22,828. And the price can fluctuate depending on tuition increases or housing costs.
You may want to create some sort of visual together to show the amount of savings they have now and how much more they need to save between now and college to afford it. Discuss the concept of debt and how they can avoid it by saving and spending wisely. You can update the money-saving charts from their childhoods to show their new goals and how their contributions are helping grow their accounts.
High School
By this point in your child’s life, hopefully, he or she has developed a sense of responsibility and financial knowledge to continue saving on their own. With college just around the corner, this is a great time to discuss what the next steps will be in terms of education.
What you can do:
Encourage your child to apply for scholarships that can help to offset the cost of college. With thousands of scholarship opportunities out there, there is bound to be something that will benefit your child.
Show kids how to create a reasonable budget for them to follow when they’re in college. Make sure it’s flexible for them to be able to adjust it as they go through school.
Diamond has partnered with Zogo, a mobile app developed by Duke University that’s targeted at teenagers to teach them financial literacy. They go through short lessons and can earn real prizes, like gift cards.
Instilling Budgeting Skills at Any Age
Even as adults, budgeting can be difficult. It’s not a skill that’s often taught in school so some people don’t learn until they’ve already developed bad habits. By teaching children early about budgeting, you can help prevent bad habits from forming and create a healthy relationship with money and saving it.