Inside: Budgeting for kids is an important life skill to learn. Here are five practical ways to teach your kids to manage money.

With inflation and credit card interest rates on the rise watching where every dollar goes has become even more important.

Some were fortunate enough to learn the basics of budgeting and money management at a young age. But others weren’t taught how and needed to figure it out on their own, which often meant learning the hard way.

If you have any children in your life, you can help them prepare for the future by teaching them how to budget and manage money.

Money isn’t a topic everyone is comfortable talking about, but it should be. So let’s look at what steps can be taken to demystify money and help kids learn to manage it well.

Keep reading for five specific strategies for budgeting for kids.

budgeting for kids

Why Budgeting for Kids is Important

A couple of weeks ago I was walking through a mall with my daughters. I overheard a woman say to her friend, “I’m going to keep buying while my credit is still good.”

That one sentence became a great opportunity to talk to my kids about financial responsibility.

We live in a culture that is focused on instant gratification. Advertisers are constantly trying to get you to purchase, regardless of whether or not you need the item or can afford it.

Constantly buying leads to acquiring debt and getting into a hole that can be very difficult to climb out of without going bankrupt. It takes intention and effort to make good decisions and not get caught in traps that can ruin your finances.

Learning how to budget and manage money is an important life skill for kids to learn.

If you never learned how to budget or manage money for yourself, now is the time to learn. You can learn alongside your kids as you discuss finances and have conversations about debt, saving, spending, and giving.

Credit card companies focus a lot of their efforts on trying to get young adults to sign up for credit cards. The more that your kids understand finances before they leave home, the more informed choices they can make once they’re out on their own.

Teaching kids to live simply in a consumer culture takes effort and intention. But by using specific strategies to help them learn how to budget you can empower them to manage their money well.

family looking at computer to budget their money

Budgeting for Kids: 5 Ways to Teach Your Kids to Manage Money

These are five specific ways we’ve taught our kids how to budget and manage their money. They’re a great starting point for practicing handling finances and for further conversations.

1. Lead by example

If you don’t have a budget yet, start with a simple minimalist budget. It doesn’t need to be fancy or complicated. It’s really about getting numbers onto paper (or in an app like YNAB) so you can see what is coming in and going out each month.

This will help you to be aware of areas that you need to cut back on and can help you figure out ways to simplify and save more money.

The next step is having conversations with your kids about money and budgeting. If they’re pretty young explain it in very simple terms. You can go more in-depth as they get older.

The point here is to introduce money and budgeting as topics that are openly discussed. This shouldn’t be taboo or something you shield your kids from. Doing so keeps them from learning valuable lessons that they can take with them into adulthood.

This is not to say that you need to be perfect at handling money. Making mistakes is part of the process and it’s ok to talk about that too in a way that is age-appropriate for your kids.

Teach your kids about the basic principles of saving, spending, and giving. Then give them opportunities to practice budgeting and money management so they can start learning from an early age.

budgeting for kids

2. Have them practice

A great way to get your kids to begin to learn how to budget is by providing them with real-life scenarios.

When you take them to the grocery store tell them what your budget is for the trip. Have them help you make decisions on which items to buy and add them up on a calculator.

By making them a part of the process they can start to practice making decisions and tracking money. As an added bonus, this can help them with their math skills as well.

When your kids are buying gifts for the holidays or a birthday for family members or friends, take that as an opportunity for them to practice budgeting.

Teach them practical budgeting tips that help you to save more money as you learn them.

Managing money isn’t a one-time lesson. It’s a life skill that is acquired over time and with a lot of practice.

kids doing chores at home

3. Giving an allowance for chores

In addition to learning about budgeting and managing money, it’s also important for kids to learn the value of work.

When you don’t give your kids everything they ask for (which leads to entitlement) and encourage them to earn their own money for the things they want, they get a taste of how life works in the real world.

You can start with simple chores in the home that earn them a set allowance and give them the option of adding more jobs for additional money.

You could also encourage them to find other work they could get paid for like babysitting, selling items they declutter from their room, or starting their own entrepreneurial adventure.

Developing a strong work ethic is something kids can begin to learn while they’re young. They’ll also have a greater appreciation for what they have when they’ve put in the time and effort to earn the money for it.

teen girl clothes shopping

4. Setting up a seasonal clothing allowance

When I was a tween my parents set up a clothing allowance for each of us kids. I’m guessing they got tired of hearing us ask for things and also wanted to help teach us to manage money in the process.

So they set up a system where every season we got a flat amount of money that was to be spent on clothing. We could decide if we wanted to save it up over multiple seasons or spend it all at once.

It was up to us to determine where we wanted to shop. If we blew all the money on one designer outfit, then we had to wait until the following season to get anything else. I learned a lot about budgeting through the process.

And now as a parent myself we started the same practice with our girls a couple of years ago. It’s been a great way for them to learn how to stretch their dollars and make their own decisions about what to buy (and what not to).

It also helps to prevent being constantly asked for more clothes when they don’t truly need them. They know it is up to them to figure out how to spend the money and that they won’t get more until the next season begins.

My kids have learned that sales and secondhand shopping mean they can get more pieces than if they simply select the first thing that catches their eye.

I’ve also heard of parents implementing a similar system for personal care products. While we haven’t done this ourselves, that can be another great way for kids to have hands-on experiences with working with a set budget.

budgeting for kids

5. Creating a fun fund

In an effort to reduce the stuff in our home, years ago we started a fun fund for our kids. It provided a way for relatives to contribute money that would be used on experiences.

Most kids have too many toys. Unfortunately with that comes clutter, distraction, decision fatigue, and overstimulation.

That’s part of why experiences make the best gifts. In addition to not adding more stuff to your home, lasting memories can be created through experiences.

Kids can hone their budgeting skills by considering various options of how to use the money from their fun fund. If they’re sharing it with a sibling, they can also work on their communication and compromise skills as well.

The only rules we created with our fun fund was that the chosen activity had to be parent-approved and they needed to have pictures taken of their adventures to share with those who contributed to it.

A fun fund is another great way to practice budgeting money so that your kids can use the skills they gain when they’re managing their finances in the future.

budgeting for kids

Closing thoughts on budgeting for kids

As you teach budgeting and money management to your kids, it also allows you to analyze your relationship with money and consider any areas that you want to improve on.

By making money a comfortable topic to discuss, providing your children with opportunities to practice budgeting, and teaching them the value of hard work you can help prepare your kids for life on their own.

Will it take effort and intentionality? Yes. But the experiences and skills you’re helping your kids to develop are worth it.

How did you learn to budget? Share your experience in the comments section below!

Sign up on the form below to get weekly decluttering and simplifying inspiration sent straight to your inbox. You’ll also get the free 8 Quick Wins for Decluttering Worksheet to help you start to simplify your life today.

Sharing is caring :)


  1. This instant gratification thing is a real money sink. Teaching kids to not immediately spend money (an allowance or gift) but saving up for something that they really want, which may take several months, is a good thing. Doing it that way is a valuable skill since while accumulating the money they begin to realize that maybe they don’t really want that thing as much as they thought they did. And if they have saved and bought that item they will appreciate it more since it took some effort on their part. Some advice my mother gave me was when I saw something that I liked and wanted to buy was to wait about a week and if I still wanted it and had the money then I could go ahead and buy it. So many times after that week had passed I had decided that no, I didn’t really want it or I had forgotten about it altogether.

  2. These are some great tips. My parents started me on a budget of .50 in the early ’50s but I had to save 1/2 of it. You could make up a “savings book” for them at home and when it’s full, they could turn it in and get that amount of money. My father gave my mother an allowance and she started putting the money in envelopes for each item – groceries, furniture replacement, clothes for each of us, utilities, everything except the mortgage which my father paid. Eventually, she didn’t want that much money in the house so she went to a double entry bookkeeping system. I think the tween clothing allowance is a great idea. I was a sophomore in HS the first time my girl friend and I took the bus to downtown Detroit to shop at our 15 story department store there. I found a bright orange wool sleeveless dress what we both agreed looked great on me. I think I had $15 ($143 today) and spent it all on that one dress. It was a favorite winter dress for years and taught me I looked good in bright colors. Now I’m now seeing ads for consolidation loans at much lower rates than credit cards charge which is a great way to get out of debt faster; however, I fear many people won’t be willing to cancel all their credit cards and only use cash so they will soon be further in debt.

Leave a Reply

Your email address will not be published. Required fields are marked *