Teaching Your Kids How to Plan Their Use of Money

People who don’t use a budget often cringe at the mere mention of the word. They think of a budget as something you go on, like a diet. “We can’t go skiing this winter—we’re on a budget.” They think of a budget as being about less—less freedom less spending, and less fun. 

But a budget isn’t something you go on. It’s a tool you use to proactively manage money. And it isn’t about less. It’s about more—having more knowledge about where your money is going so you can be more intentional in how you use it and have more for what matters most. 

A budget, or as I prefer to call it, a cash-flow plan, is the single most powerful tool anyone can use to manage money well. Teaching your kids how to budget is one of the most important ways to equip them to manage money effectively.

Raising the Next Generation of Cash-Flow Managers 

As soon as your kids have any money flowing into their lives, teach them that being intentional about how they use money is part of what it means to be a good steward (or manager). We don’t want to be reckless with God’s resources. We want to plan how to best use them. 

Every Dollar Gets a Job 

Even when your kids are pretty young, there are two essential budgeting lessons they can learn. The first is how to allocate portions of every dollar they receive toward different priorities. Initially, focus on three of the five main outgo categories: giving, saving, and spending. Teach them to give the first portion, save the second portion, and use the rest for spending. That’s a beginner’s budget. 

To make this easy, there are piggy banks and other containers on the market that have separate slots for these three categories. You could also use Mason jars or envelopes. 

You’ve probably heard about the 10-10-80 framework: give 10 percent, save 10 percent, and spend 80 percent. I prefer 10-15-75, but that’s for us adults. For kids, I think something like 10-50-40 makes more sense. There are so many expenses kids don’t have that they will have when they’re older (a mortgage or rent payment, taxes, insurance, groceries, etc.), that if they get in the habit of spending 75 to 80 percent of all they receive right now, that’ll be unsustainable later on. Plus, our kids have a huge opportunity to save, so let’s encourage them to make the most of that opportunity. 

When your kids are really young and are receiving a very small amount of money, 10-10-80 is fine. But as they start receiving more, make some adjustments. Move them to 10-20-70, and then to 10-30-60, and on from there. 

If You Don’t Have It, You Can’t Spend It 

The second essential budgeting lesson young kids can learn is the importance of living within their means. That may seem kind of silly since we’re talking about 40 to 80 percent of small amounts of money. But keep in mind that habits established early will be magnified later. 

Let your kids experience the excitement of using their own money to buy candy or stickers, but make sure they learn to adhere to limits. If they use up all their spending money and then see something else they want to buy, don’t come to their rescue. Don’t give them an advance on next week’s allowance, and don’t buy the item for them. Let them feel the pain of regret over having so quickly spent all that they had. 

Save Some for Later 

The next time they receive some money, maybe (with a gentle reminder from you) they’ll think more intentionally about how to use their spending money. As you get set to take them to the store, maybe they’ll decide to leave some of it at home. Sometimes, maybe they’ll decide to leave it all at home so they’ll have more to spend on something more expensive later. 

As they get older and receive more money, teach them to put their spending money into different envelopes for different purposes. Maybe some is for candy and some is for books. When your kids begin choosing to hang on to more of their spending allocation for more expensive things they want to buy, they will be naturally transitioning themselves from 10-10-80 to 10-20-70 and beyond. This is a very good thing.

Talking the Talk 

When John and Joan were raising their four children, they were very intentional about how they spoke to their kids about money. John said, “We tried not to say, ‘We can’t afford that.’ That’s just a really negative story to tell a child. It’s an easy answer when they ask for something, but I think it imparts too many negative emotions. ‘We couldn’t afford this; we couldn’t afford that.’ How are those words going to play in their head later on?” 

Instead of saying, “We can’t afford it,” John and Joan would say, “It’s not in our plan right now” or “We’ll save up for that.” 

That’s another reason why it’s so important to have a plan. 

 The rest of the story

This article was adapted from my new book, Trusted: Preparing Your Kids for. Lifetime of God-Honoring Money Management. Why not pick up a copy, either for your own family if you have kids at home, or for another family? One of the greatest gifts we can give our kids is some early, intentional training in managing money from a biblical perspective.


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