We recently decided it was time for our first-grader to get his first taste of budgeting and what a budget entails. Don’t get me wrong, it was nothing in-depth, more of a very general budget explanation and breakdown. But at this age, we didn’t want to make our explanation overly complicated.
Some might wonder why we started teaching such financial concepts to our child so early. Well, if the interest is there, my question would be, why not?
Therefore, here is how we tackled the subject and explained the subject of budgeting to a youngster.
Gauging his level of interest and understanding
First off, if was important to understand our child’s level of interest and understanding of the subject of money and personal finances. Living with a father who writes personal finance articles, our kids will obviously grow up around money talk. This doesn’t mean that they’re guaranteed to have an interest in money though.
Thankfully however, our first-grader does. He’s good at and enjoys counting money – both coins and dollars – and has an appreciation for and basic understanding of how money is used. This knowledge is helpful since it gives us a starting point for our explanation of budgeting.
Putting it in relative terms
While our son understands what money is, at this point, putting things in terms of thousands or even tens of thousands of dollars wouldn’t mean any more than putting them in terms of a dollar when it comes to how a budget works. Therefore, when I did our budget example, I did so using the amount of $1.
I broke costs as follows: 10 cents from each dollar goes toward food, 5 cents goes toward utilities, 10 cents goes toward the association fee, 5 cents goes to fueling the car, etc. While the amounts don’t match up with our family budget, it didn’t matter since this was just an example. And this way, the explanation had more of an effect because it was explained in amounts that resonate better with him.
Explaining what costs are
Many kids don’t understand terms like “utilities”, “association fee”, “vehicle insurance”, or “income and property taxes”. And even if they’ve heard of such things, they probably don’t know exactly what they are or what they entail.
Therefore, we used our budget explanation also to discuss what comprise such costs or what they do for our family. Explaining that utilities are things like the electricity that powers our home’s lights, cable television, and internet, the gas we use to cook with and heat our water with, and similar items, not only gives our child an explanation of what utilities are, but helps them understand that we have to pay for such items and that they aren’t just provided to us free of charge.
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The author is not a licensed financial or parenting professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.