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Budget Basics for Kids

Every Penny Counts

When you are a child, the concept of money can be difficult to understand. From a young child’s perspective, “What is the value of a dollar, and what can I do with it?” is an important first question in learning about money. It can be helpful to use everyday experiences with your children – like trips to the grocery store, gas station, or bank – as learning opportunities to teach them the basics of budgeting.

For example, when you are out buying food, you can draw comparisons to illustrate the tangible value of five dollars: “With five dollars, we can buy two boxes of cereal, three pounds of apples, or one half gallon of ice cream.” This way your children can begin to measure the value of a dollar through real-life examples. Using store coupons can be another helpful way to teach your kids about how to save money: “This coupon allows us to get two dozen eggs for the price of one – for a savings of $1.59.“


As a parent, setting a specific allowance amount will depend on your child’s age and your overall household income. The purpose of an allowance is to give your child the opportunity to assume responsibility for making financial decisions, such as how much to save and how much to spend right now. Ideally, getting an allowance should not be tied to the completion of chores; children should be expected to do work around the house as a contributing member of the family.

An allowance encourages independent thinking and financial management, which means that your kids may make mistakes and be irresponsible at times, but this is how they will learn. If buying that super-cool racing bike is a goal, then your child will have to choose between saving money over an extended period of time or spending all his or her money on immediate wants like going to the movies with friends or buying the latest CD. Children can learn a lot about financial discipline and delayed gratification through the freedom they have with their weekly allowance.

Part-Time Jobs

Children usually earn their first part-time job money through babysitting or newspaper delivery. By the time kids are teenagers, they may be working at fast-food restaurants, bookstores, supermarkets, or amusement parks. Part-time jobs are an excellent way to develop a healthy work ethic, learn how to manage money, and keep track of personal spending habits. Make sure that as parents you keep an eye on priorities, though. Your children’s education should not take a backseat to earning extra cash.

Savings Accounts

Another essential way to help your children appreciate the value of money is to go with them to open their own personal savings accounts at a bank or credit union. Having an individual savings account will instill a greater sense of personal responsibility and monetary decision-making into your child. Encourage them to save a certain percentage of their allowance or money from part-time jobs every week. With compounded interest in a savings account, their money will grow fast. For example, if your child invests $20 a month in a savings account that earns 5.0% interest annually with monthly compounding, it will grow to $266.60 after one year, $1,385.78 after five years, and $3,138.58 after 10 years. Owning a personal savings account early in childhood can lay the foundation for a lifelong commitment to investing for the future.


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Last Updated: 12/14/2017