Financial Literacy: How to Teach Kids To Budget

Money is a source of stress for so many people; not just how to earn it, but what to do with it. And the topic becomes more complex when you have kids and need to budget for their needs and teach them about money. I'm subsequently thrilled to welcome Sandra Gilpatrick as a new contributor! Sandra not only is a Beacon Hill expert and devoted mom; she also works to help women become financially confident and competent. SO AWESOME. Welcome to Sandra's first financial literacy post on teaching kids how to budget:

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From Sandra:

My inspiration to write a series on financial literacy came to me when I realized my son was the only 4-year-old I knew who was already saving for a house. I did the obligatory Google search and had a difficult time finding any articles written by financial advisors who were mothers themselves, writing about actual lessons they were teaching their children. Through my work as a financial planning professional, I’m passionate about helping women find their confidence with finances; through this new series on Boston Mamas I’ll share doable tips on how to become -- and teach your kids to become -- financially savvy. Today I want to share 5 tips to teach kids to budget:

1. Make financial “fitness” a part of your regular routine. Having a basic handle on how much money comes in, knowing what is spent, and understanding your required debt payments is a basic financial exercise. Like most important parts of life, the first few steps always seem the most daunting. As you are reading this, you may be listing one or two reasons why this has caused hesitation. Here is a sample budget worksheet and a cash flow worksheet to help you get started. Becoming financially “fit” will help equip you with the skills to pass along to your kids.

2. Choose a budget threshold. Kids aren’t born with a sense of money and value; you’ll need to give them context. I chose $5 as the budget threshold to acclimate my son about value. For example, if he saw something for $10, he would think it was expensive given that $10 was twice his $5 threshold.

3. Teach financial value through chores. One simple way to teach kids about financial value is through chores. For example, my son wanted a $20 toy desperately, which was well over his $5 budget. He did extra chores around the house to earn the money. The most I gave him was $1 for a major effort; smaller tasks ranged from 5 to 25 cents. Eventually he saved up $20 and he still wanted the same toy. It can be easy as a parent to spend $10 here and $25 there at the whims of your pleading child. Before you realize it, you can cumulatively spend hundreds and be outside of your own budget.

4. Have your kid become a savvy consumer. When my son likes something in a store I have him read the price tag. He will know if it is within his budget or decide if it is something worth saving for. More than once, he has dealt with the disappointment of a newly purchased toy not living up to his expectations, or experiencing hopeless buyer’s remorse when the toy breaks instantly. Over time, he has learned to evaluate items and he often discusses their worth with me. Our conversations also have led to discussing -- and viewing documentary clips of -- toy factories in other parts of the world that permit deplorable work conditions. I gave him a lesson in labor economics! Not only is he used to working in a budget, but he is also becoming a savvy consumer.

5. Keep at it! Instilling sound financial habits early in children increases the likelihood that they will retain these habits into and throughout adulthood. Be consistent with the above, simple practices and you’ll be on your way. And don’t be hampered by feeling behind if finances have scared you; it’s never too late to get started!

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Are there specific financial topics you’d love to see Sandra address? Drop me a line at to let me know!

To learn more about Sandra, visit Third party posts on this profile do not reflect the views of LPL Financial and have not been reviewed by LPL Financial as to accuracy or completeness. Securities offered through LPL Financial, Member FINRA/SIPC.

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