What Your Kids Can Teach You About Budgeting
I’ve been budgeting for a long time. I’ve been teaching people how to budget for a long time. But only recently have my kids had budgets of their own.
Like many adults, our three children had made some attempts at giving their dollars jobs. My son, for example, has a plastic tub sitting on his dresser. In the top, he cut a slot to drop in coins, and made a duct-tape label that says iPod Touch Fund. Just like a lot of people’s savings accounts or sets of paper envelopes, it represented his idea that he needed something to help him reach his goal.
It’s full of change, but also a few other odds-and-ends that have nothing to do with money – because now that he has a budget, that plastic tub is just a container for his money. And Nerf gun pieces. And some small rocks. And, well, you get the idea.
When I finally taught my kids to budget, I was planning on them learning from me. But it turns out, I also learned a few things from them.
Our twelve-year old is really good at letting things go. She’s not hung up on the immediate concerns of the day, which is why she budgeted about 90% of her money to college.
Our ten-year old knows what he wants. That iPod Touch fund that was a plastic jug still figures prominently in his budget, along with a Lego Mindstorms set (more on that later).
And we realized our seven-year old has shifting interests (okay, we actually sort of already knew that) and loves to change his budget goals almost every time we talk about it.
As a father, it has been great to learn about each of my kids in a new way through their budgeting. And exciting to watch them understand money in a way that will serve them well for a lifetime. If you’re interested in budgeting with your own kids, here’s a few things I’ve learned to help you get started:
Keep it Simple – Budget Their Cash
Beginning budgeters often ask how to budget all the payroll deductions out of each paycheck—things like health insurance or taxes or other deductions. The answer?
You’re not making decisions about that money. Just budget your net pay, whatever is left after all that money comes out and make active decisions about the money you have on hand. That’s prioritizing.
This is really important for kids, too. We’re fortunate that our kids’ grandparents have given them small sums of money over time, earmarked for college (or perhaps an entrepreneurial start-up if they choose that route instead, but that’s a conversation for another day…).
That money is sitting in a savings account or 529 they don’t need to think about. It is destined for some decision we hope they’ll be mature enough to make when they’re quite a bit older than they are now. Those dollars already have a job.
Right now, though? The money they are actively prioritizing is in their piggy banks or plastic jugs at home. It’s their weekly allowance money from doing chores or mowing the lawn. It’s caring-for-the-neighbor’s-plants money. That’s the money they are budgeting.
Focusing only on this money keeps it simple, which is especially important for kids who are just learning to budget. It avoids the false impression that they have access to more money than they actually do. It reinforces the idea of scarcity, which helps them make really good decisions that are aligned with their priorities.
(If you are thinking this all sounds very similar to our budgeting advice for adults—congratulations!—you’ve been paying attention! Keeping it simple will work wonders for you, too.)
It’s OK to Budget for One-Time Goals
A lot of YNAB users tend to budget for general areas or categories. I mean, that’s what we call jobs in the budget—categories.
But, really, what you’re budgeting for is your priorities. It doesn’t matter if those priorities fold neatly into a larger category, or if they are unique, one-time goals.
Like Dave the Minion.
Dave the Minion, star of the Despicable Me movies (which were much better than the new Minion-only spinoff, if you ask me), is not just a character. He’s a small plush toy, and my seven-year old already has a set that includes Stuart, Jerry, Kevin, and Carl.
But he really wants Dave.
And so, Dave is also a category in my seven-year old’s budget, sitting right there underneath his college money (more on that in a bit).
Honestly, it’s tempting to spend the $12.99 and buy it for him. Who wouldn’t want to be that Minion-delivering, super-hero Dad?
But as he budgets for Dave, my son gets to see his dollars at work and he’s almost there. He learns that gratification isn’t always instant. He feels purposeful, learning that his money really can help him reach his goals. As fun as it would be to present him with Dave the Minion, watching him learn these really important lessons is even better.
If he just had a category called “toys”, he wouldn’t experience the same joy and excitement in assigning his dollars. Each dollar gets him closer to Dave the Minion. I can’t imagine him being as invested in his budget without the appeal of his very specific goals.
Leave Space for Their Priorities and Yours
When it comes to categories, I gave my kids a nearly blank slate. I mean, I wouldn’t have come up with Dave the Minion as a priority, but it’s important that they see budgeting as a way to reach their own goals. Personalizing their categories drives this home.
Kids don’t always get a chance to express what is important to them. My son’s Lego Mindstorms category I mentioned earlier? Sure, he loves Legos and just having fun. But he also wants to be an engineer. At ten years old, he’s having a chance to put his money behind his idea, and for us to talk about it together.
Inside this nearly blank slate, though, I did insist on three categories: 1) College 2) Gifts and 3) Giving.
College communicates the value we place on education and learning. Maybe they won’t all go to college. Maybe one starts a company instead. Whatever they do, however they learn and grow as young adults, it won’t be free. So we teach them to invest in their own future.
The Gifts and Giving categories teach them that their money is not just about them. Generosity is important, whether that is birthday gifts for their family or giving to an important cause. We want them to grow up thinking of others, and believe that budgeting for this from an early age will turn this hope into real action.
They Might Surprise You and be Really Good at This Budgeting Thing
Budgeting is simply an activity that aligns your money with your priorities. And you know what? My kids might be better at it than I am.
They know what their priorities are. They have no misgivings about labeling them and being clear which are most important. They have no problem making adjustments when those priorities shift.
My kids are also really good at budgeting with just the money they have right now. When I explained to them that they wouldn’t, for example, be able to budget next week’s allowance until next week when they actually received it, I got a rather incredulous look from my daughter. Yeah, Dad, of course. Why would we do that?
Okay, budget away. Dad not needed.
Come on, Give it a Shot
If you’ve got your own budget and you’ve got kids, give it a shot. Give them their own budgets.
Don’t worry about doing it wrong, or what they might decide to do with their own money. Keep it simple and work with a small amount of money that you are comfortable with.
Help them think about their priorities. Make sure your own are represented too, but let the budget largely reflect Minions and Minecraft and M.I.T., or whatever the case may be. Let them own it.
You might even be surprised about what you learn from them about how to fine tune your own budget.