Teaching financial responsibility and budgeting skills to children is important for their future success. While many schools do not require personal finance classes, parents can introduce basic budgeting concepts to even elementary school kids by keeping lessons simple, using physical objects, and having children allocate mock money to savings, spending, and sharing jars. As children get older, parents can discuss more advanced topics like investing by having kids choose a stock to track and letting them experience how the market works over time. The overall goal is to creatively instill good financial habits in kids from a young age through hands-on activities.

1. Teaching Your
Kids to Budget
Why and How:

2. As all parents know, financial responsibility is a
hugely important life skill, one that’s crucial to
future success. From balancing your checkbook
to making sure you pay off bills on time,
budgeting your money is indispensable to all
functioning adults.
Let’s take a look at the case for why this subject
should be taught in schools and some ideas for
how you can help your child get a head start on
this key ability.

3. Unfortunately, many children
aren’t being taught this crucial
skill, at least not in class.
Though each school is different,
and many do offer personal
finance classes, it’s often not a
requirement. In fact, as the
Council for Economic Education
found, only 17 states require
students to take high school
personal finance classes.
Personal
Finance, by the
numbers

5. And if you’re a parent who wants to set your
child up for future success, this is a troubling
trend, to say the least. In a survey by
Mastercard, 65% of the parents of college-
bound students expressed concerns over their
child’s ability to budget and manage finances.
Unfortunately, it seems these parents have good
reason to be worried: from 2012-2014, one
survey found a sharp decline in the percentage
of students reporting financially responsible
behaviors, such as paying credit card bills on
time, reviewing bills, and following budgets.

6. Even students seem to be aware that they are missing out on a
crucial area of expertise. In a 2011 survey, researchers at Charles
Schwab found that 86% of high school students (16-18 years old)
would rather learn about money management in a class before
making mistakes in the real world. Further, 75% of students felt
that learning more about money management, particularly
budgeting, saving, and investing, was one of their top priorities.

7. Clearly, the will to learn is there. But rather than wait for their
children to discover the value of personal finance months
before they ship off to college and live on their own for the
first time, parents should instead build up their children’s
financial literacy as soon as they can.
How to step in

8. Even elementary school students
can, and should, learn budgeting.
The key to teaching this
important concept to younger
children is to keep the lesson
simple, short, and tangible. Try to
stay away from abstract concepts
like mortgages, loans, and bank
payments, and instead break it
down into simple ideas. Be sure
to use lots of manipulatives
(physical objects) and money,
either real or imitation. It’s
important to have something that
can be touched, moved, and felt,
as younger children haven’t yet
developed the ability to imagine
long numbers and ideas with
their minds.

9. Saving, spending, and
sharing
One great activity comes from Sesame Street, which
instructs kids to put away some money for savings (so
they can buy more expensive toys later), some money
for spending now, and some for sharing. As you watch
the video, note that the child drops money into jars,
which helps him visualize and imagine which category
the money is going into—again, another reminder that
children learn best when they have objects to
manipulate.

10. Saving, Spending,
and Sharing
Sharing is another interesting
category, although an entirely
optional one. The money in this jar is
set aside for donating to any cause
that your child will choose, such as
helping the homeless, assisting less-
fortunate children, or perhaps even
shelter pets. Whatever the charity
may be, it’s important to build a
foundation of generosity now, so
that your child can nurture and build
this spirit as time goes on.

11. When your children can understand saving, spending, and sharing,
they can move on to more complicated topics, like investing, which, in
some ways, resembles long-term saving (albeit one where your savings
can grow, thanks to interest rates). Research has found that the
earliest time to introduce interest rates is around 9 or 10 years old,
when children with a strong background in numbers can begin to
understand more high-level, abstract concepts.
When (and how) to teach investing

12. One interesting activity centers around
teaching children about stocks. One
mother allowed her three children to
invest in one stock from a company that
they had an emotional connection to: her
son picked Apple, as he loved computers,
whereas her two daughters picked Disney
and Honeywell (the electronics maker
who manufactured her thermometer).
Afterwards, the family spoke about the
stocks at the dinner table, tracked market
trends, and even put on an informal
contest to see whose stock had the
highest returns (at press time, it was the
daughter who invested in Disney).
Clearly, this activity wasn’t just a learning
experience—it was also a fun, cute
bonding activity that encouraged friendly
competition and collaboration.

13. In the end, teaching your children about personal finance is
important, and most of all, inexpensive. Creativity and
cooperation is the key here: be it the $20 challenge, paying
your child for chores (to reinforce the bond between work
and pay), or letting them help with your family’s budgeting
process, there are plenty of cheap, easy ways to help your
child develop their understanding of money.

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