Budgeting for Kids: How to Teach Budgeting From Age 3 to 18

Budgeting is a simple concept that can be difficult in practice.

We all know the basics of what a budget is, but most people don’t follow one.

I mean that literally: most people, regardless of what they say, don’t follow a budget, according to a Gallup poll.¹ This number comes as a surprise considering how easy it is to download a simple monthly budget template online. Around 32% of Americans follow a budget regularly. That’s around the same percentage as Americans with a long-term plan for their finances.²

Coincidence?

Before we can teach budgeting to our kids, we’ve got to understand the basics ourselves, and for our kids to actually listen to us, we better be following one.

Budgeting Basics

Starting a budget as an adult is simple. I can break it down into five steps:

1. Track your expenses & income for one month
2. Create the categories that fit your life
3. Set some short-term & long-term financial goals
4. Cut certain areas to make those goals possible
5. Adjust your budget accordingly over time

I think the most important step here is the last step, because that’s what builds the budgeting habit. The most common budget killer I’ve seen is unexpected expenses.

I’ll watch someone track their expenses, set a budget, and stick with it all the way up to some event that causes them to spend an unexpected amount of money. That blows one of the categories, and causes the budget to be unbalanced for that month, and then they give up.

A budget is a living thing. It’s constantly changing with your life, and you shouldn’t expect it to stay the same, because life doesn’t stay the same.

These are all things kids will need to know before they go out and try to create their own budget, but first, we need to meet kids where they’re at. A five-year-old isn’t going to understand anything above this line. So let’s talk about budgeting at each age…

Budgeting (Ages 3-5)

Three is about the youngest age we’ve implemented the give/save/spend jars, but the emphasis is on the give and spend jars. At this age, kids can start learning the importance of giving, but they also need the freedom to spend most of their money so they can start learning what that feels like.

Read: The System We Use to Pay Our 5 Kids for Chores

If you have a super gracious child who wants to give most of his money and spend very little, it’s best to encourage more of a balance. I’d say a 10% savings goal is reasonable at this age, but for giving and spending, anywhere from 10%/80% to 45%/45% works.

I’d suggest at least giving 10%, and not giving more than half of the remaining 90% left over after saving 10%.

It’s also a good idea to make the giving/saving/spending highly visual at this age. Get a large, clear jar, and use actual dollar bills to fill it up for savings. Let them physically give their own money at church, or wherever you decide to give. And give them their own money to spend when they’re making a purchase, but you may be the one to keep up with the money until they’re ready to spend it.

Budgeting (Ages 6-11)

By this age, you’ll be able to tell if your child is more of a saver or a spender. You can start to encourage them to do a little more of whichever one feels less natural. If you don’t, it could turn into a bad spending habit or a money-hoarding problem later on.

Now it’s also time to put more emphasis on saving, and get specific with the percentage your child wants to save. They’re old enough to understand how to save for something, and purchase it, but it’s likely they don’t quite have the discipline to save large amounts of money.

It’s time to let them save for something big (preferably a few hundred dollars), and let them buy it. If they want to adjust their jar percentages at this time, feel free to let them.

Budgeting (Ages 12-14)

It’s time for the car talk. Before now, decide whether they’re buying their own car, you’re buying the car, or a mixture of the two. Once they hit the tween stage, they need to know the plan so they can do their part.

Read: The Complete Guide to Kids and Cars

If you’ve allowed them to spend their own money for the last few years, they should already be accustomed to the value of money, and how giving, saving, and spending work. If that’s the case, budgeting will be natural from here.

Budgeting (Ages 15-18)

At this age, your child should start seeing some of her own expenses. Things like a cell phone payment or car insurance.

Read: When Should Your Kid Have Their Own Phone?

Now it’s time for the debt talk. You can help your kids stay debt-free forever if they want to be. If they stay out of debt, they won’t have to learn how to dig their way out later.

It’s time to start showing them the family finances. Don’t hide your finances from your kids. Let them see what a budget looks like. If you’ve made mistakes, let them learn from your mistakes.

Have your teen set categories for their own budget. It should be a simple version of a family budget, and it would just include things like entertainment, eating out, car insurance, cell phone payment, etc.. You can introduce them to Dave Ramsey’s baby steps, starting on step #3.

Introduce the concept of investing by adding a “grow” jar to the other three jars. At this point, they likely won’t still be using physical jars, but the concept remains the same.

Read: How to Teach Your Teen About Money

Before They Leave Home

There are several things your child needs to know before leaving home. From understanding insurance to retirement plans to the main point of this article: budgeting. If they’ve spent their entire life learning more and more about budgeting, they’ll be a step ahead of everyone else.

Before they leave home, create a sample budget with them, especially if they’re moving out immediately upon graduating high school to attend college. Your child will never have money problems if they grow up learning all of these concepts, gradually, over time.

Further Book Reading

• Teach Your Child to Fish by Holly D. Reid
• Make Your Kid a Money Genius by Beth Kobliner
• Money Monster or Money Master? by Norma LaFonte
• Moneybags: A Guide to Teach Your Kids About Money by Wendy Gillespie