How to Set up a budget for your kids

Do you remember when you got your 1st checking account? I remember mine for sure! It was a big deal on many levels. 1st – I had money to put in the checking account – yay for that! 2nd – I felt like an adult and not a kid anymore.

I remember subtracting that check amount from my bank balance every time I wrote a check. The balance reflected in my paper ledger matched the balance the bank said I had…to the penny.

Unfortunately I did not really know what that balance really meant. If it said I had $200 I would think I had $200 to spend. I totally forgot about the gas my car needed to get to work, the auto insurance that was due in 3 months, or the birthday present I needed to buy for my mom. And wham….before I knew it I was in trouble. Scrambling to make the payments I should have been saving for…and knew were around the corner, but totally forgot about. Has this ever happened to you?

I remember being taught how to balance my checkbook in accounting class (this is NOT even taught anymore). I don’t remember anyone showing or teaching me how to budget my money. Yes – money in equals money out…..right? Easier said than done for sure! Especially in today’s world of ‘Buy NOW Pay LATER’.

Are you wondering why your children need to be on a budget?

Why it is important to be teaching kids about money?

Money is great. Money allows us to live indoors and have food on the table. Money gives us freedoms. But, there is also a responsibility that comes with money. How to spend it. When to spend it. How to save. When to save. Being able to take care of yourself for the now….and the future.

Or, maybe you are wondering how to establish a budget for your kids? Would you like to be able to teach them how to spend their money so that when they are older they can be the boss of their money and not have their money boss them around? Or, maybe you are wondering where your children get money to even be on a budget since they aren’t old enough to work?

I recently wrote 2 blog posts pertaining to kids and money. You might want to read them 1st before continuing reading this post. This is part 3 in a series of 3-

1st – Why You Should Give Your Kids an Allowance
2nd – Should Your Children be on a Budget?

No time to read the 1st 2? Here is a quick synopsis:

1. Kids need money to spend.
2. Since kids can’t get a ‘real’ job they need to receive money somehow – hence an allowance.
3. And, once the allowance guidelines are established, they need to learn how to budget that money so they are always paying themselves 1st and saving for later.
4. They also need to learn that money does not grow on trees (or come from the ATM machine).

How to begin teaching kids about money –

When my kids were really young they each received $1 a week and a cute little bank with 3 slots.
10% or 10¢ would go in Give.
10% or 10¢ would go in Save.
And 80% or 80¢ would go in Spend.

They learned to give and to pay themselves BEFORE they spent their money on expenses (like gum). They were so excited to keep 8 dimes for themselves!

As they got older their ‘needs’ increased in $ value. A pack of gum was no longer sufficient. My son needed new skate board wheels….constantly. My daughter loved to shop and buy new clothes, purses, make-up….or whatever caught her eye! They were always asking me for money. Sometimes I would give it to them and sometimes I would not. Are your kids always asking for money?

Since my husband and I were living on a strict budget ourselves, giving them money wasn’t always in OUR budget. And, how would they know if I would say yes or say no? How could they determine their own spending? And, when we said no, sometimes there were fights and even tears…BUT MOM!

I quickly realized that they needed an updated budget besides Give, Save and Live on the Rest. They needed to be in control of their own spending and their own budgets.

This is how we set up the allowance budget for our kids –

I don’t know if any of this will resonate with you or not – Remember – this is what we did. I have been told, by others I have helped with budgets (as a money wise counselor) that it worked for them. I sure hope it helps you too.

First – we increased their allowance. Did I hear you say – how much? Well, I am not quite sure but I do know that I –

• Did a bunch of research on the cost of skate board wheels and how often my son needed them.

• Went shopping to find out how much a skirt or a t-shirt cost for my daughter….nothing designer at all. More like Forever 21 or Target.
• Looked at my own budget to determine how much I had to set aside for them.

As a result, we increased their allowance to cover basic items. All else they had to save for. I don’t know about you, but if I have to save for everything I get frustrated. Don’t you need a few extra bucks to spend without saving?

Second – their budget categories increased as well.

• They still had ‘Give’ (10%).
• They still had ‘Spend’ or ‘Live on the Rest’ (65%). This money was their ‘whatever they wanted’ money. They could spend it as they determined with no questions asked…well, I probably would ask them if they thought that was the best use of their money if I felt they were buying something silly. 🙂 I am a mom after all.
• They still had ‘Save’ – only now it was (25%) and split into – Short term savings (5%), Long term Savings (10%), Start of Life Savings (10%).
  • Short Term Savings – Anything that their normal 65% spending would not cover (like skate board wheels).
  • Long Term Savings – They had to write down what they were saving for.

    Why? Well, let me ask you this….how often have you started to save for something….and then something else catches your eye….and you completely forgot what you were initially saving for? Or other ‘wants’ surface and you get distracted from your goal? Exactly! Don’t you find that you get distracted and forget way too often

  • Start of life savings

What is ’Start of Life Savings?’

Eventually kids do graduate from college and move out of the house. (Do I hear a hallelujah!)

Do you remember your 1st apartment? Do you remember the requirements of moving in? Boy – I sure do. In case you have forgotten here are just a few.

• 1st and last months rent PLUS security deposit.
• Utility deposits
• Car registration
• New license
• Car insurance
• Renters insurance
• Furniture (like a mattress, a few lamps and basic cooking supplies)
• Movers

All of that requires money. A lot of money. I wanted my children to be able to pay for all of that themselves. My son was not at all happy about the extra 10% being set aside…but he did comply. (My mommas heart became very full when, after he got his 1st apartment (right before he got married), he called me to thank me for making him save). It was an easy and smooth transition for himself and his wife.

So why is a budget so important? Budgets are a way of YOU telling your money where to go.

Budgets are a way for you to be the boss. Not the other way around. The Borrower is the Servant to the Lender. If you have credit card debt, or furniture store debt, or car payments, or orthodontist payments….You are now a ‘slave’ to the lender. You owe. The old saying ‘I owe I owe so it’s off to work I go’ is so true. Or Jackson Browne’s song ‘ Caught between the longing for love and the struggle for the legal tender’. I am sure you will agree, the struggle is real!

So, are budgets important? Yes.

Do they work? Yes.

Are they easy – NO WAY.

Budgets are hard. I don’t know about you, but I tend to look at other people and measure what they have to what I have. Do you do that? Do you want to go on the same vacations that they go on? Buy the same fancy new car? Buy a house because you are told buying is better than renting?

But, here is a kicker for you….Did you know that – ‘65% of all Americans save little or nothing. And over 50% will struggle with retirement.’ Bankruptcy rates in our seniors is at an all time high. Why? Because they spent too much and saved too little. Maybe, just maybe, no one taught them to live on a budget.

This is why, in my humble opinion, I know and totally believe that attitudes about money and spending habits begin when kids are young. What do your kids know about budgets and spending? I promise, if you don’t teach them someone else will.

A few miscellaneous budget items –

• We had an understanding in our home – if their GPA was a 4.0 they did not have to get a job outside the home. My son got his 1st job at Starbucks – his budget was exactly as described above. That is why he was able to have a size-able ‘Start of Life Savings’.
• What did we do when they receive money as a gift? – we decided that it was just that….a gift. Not income. So they did not have to set aside any of that money into savings unless they wanted to.
• Since our personal income was not constant and was always changing we decided to live on percentages. That took the guessing out of the game and made it easier for us to make decisions. This is why we used %’s with our kids.
• And, If you would like to save a bit more money yourself check out 40 Ways to Save Money NOW. Or How to Have a Debt Free Christmas.

So, how did all of that shake down with my kids?
I must say, it was very interesting. If my son did need new skate board wheels, and his short term money was….short, he would, on his own accord, save his ‘Live on the Rest’ money so he had the money to buy them sooner. What I also noticed, is that he wasn’t as careless with his board – he didn’t throw it around as much or hit as many walls with it. What did he learn? How to save, how to manage his money, and that things are expensive and he should take care of them. He also learned that not everything is immediately available. A plan must be in place.

As for my youngest daughter….she really did love to shop. She loved clothes. So, we increased her allowance quite a bit – but not so much that she had freedoms with it. She had to buy all her own clothes, shoes, make up, hair stuff, jewelry, key chains….anything that she needed besides general living expenses (food etc). She learned to save. She learned to shop sales and she learned to live without. She also learned to make sure she LOVED her purchase….cause money did not grow on trees. (Her husband thanks me for raising a daughter (and now a wife) who does not have expensive tastes. Which takes the pressure off of him, as a husband, trying to keep her ‘in the style she is accustomed to’.)

And…just for fun – A few winters ago I was visiting my daughter, Nicole and her husband, Zach. Zach was trying on clothes at an outlet store and had quite a large pile of items he wanted to buy. Rather than just grabbing the pile and paying for it – he asked Nicole to look up (on his online budget) how much he had in his clothes budget. He proceeded to calculate what they all cost…..and then only purchased his favorites AND what he could afford….the $ amount in his budget.

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A few Joyful Living posts for you to read!

What is Joyful Living?

5 Simple Steps to Choosing Joy

Finding Joy in All Things

What Does God Say About Joy?

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