Teach Kids How to Create a Budget: 6 Steps to Getting Started

Teach Kids How to Create a Budget: 6 Steps to Getting Started

It's never too early to start teaching kids how to budget. Rather than waiting to see how well kids manage when they get their own credit cards, we can start guiding them earlier to understand what a budget is and why it's important.


Whether your kid is 6 or 16, you can start teaching them basic budgeting skills in an age-appropriate way. When they're old enough to start making bigger financial decisions, they'll already be prepared.

Consider these six steps to start teaching your kids how to budget.

1. Involve your child in household budgeting tasks

Offer your child a glimpse at how you manage your own household budget by getting his or her help with something small, like your weekly grocery list. For example, share the amount you want to spend on groceries, as well as the household's needs and wants for the week, and let your child help you create a shopping list. If you use grocery pickup or delivery services, your child might even assemble your online grocery order. Figuring out how to meet needs while staying within the grocery budget can be challenging and fun, as well as educational.


Older children may be ready to help with even bigger household budget tasks such as budgeting for summer activities. The idea is to give your child real-world experience with making purchases while staying within an allotted spending amount.

2. Discuss needs and wants

Use the grocery shopping experience or other similar experiences to share with your children the difference between items you need and items you want. For example, your grocery budget may always include staples such as milk and bread (needs) but only occasionally include a special treat such as your kid's favorite snack (want).


Children of all ages can understand the difference between needs, like shelter and clothing, and wants, like a pool membership, vacation or streaming subscription. Over time, work to reinforce these ideas to help children put their spending in perspective.

3. Make income attainable

Kids may not be able to go out and get a real job, but they can earn money at home to start learning how to budget. Some parents choose to give kids a guaranteed weekly allowance with opportunities to earn more by doing extra chores. Other families offer an allowance based on completed chores each week. As children get older, they may be able to earn extra income by working outside the home or by completing chores for grandparents, neighbors, or friends.


However you decide to structure your child's allowance and earning capabilities, they can develop a plan for how to use the money wisely. Consider using a debit card for kids such as GoHenry to easily transfer your child's allowance into his or her account, as well as track chores and tasks completed to earn money.

4. Encourage your child to set financial goals

Building and sticking to a budget is an ideal way to accomplish financial goals over time. To see the results of budgeting in action, your child needs to set financial goals of their own. Help your child set a long-term saving goal, such as a car, as well as a short-term saving goal, like a pair of shoes. When they have their goals in mind, sticking to a budget will be easier.

5. Make budgeting easy

A budget is really just a plan for spending your money. There are plenty of easy ways to develop a budget that works. Teach your child to include the three categories: Save, share, and spend.


For example, your child could follow these four steps to build a well-rounded budget.

  1. Calculate how much they make each week. That figure might include regular allowance, extra income from outside jobs or chores, and gifts.

  2. Allocate savings. A general rule is to save at least 10% of your income. If your child is working to meet a specific savings goal, he or she may want to increase the savings percentage to reach their goal quicker. Guiding your child to save up for their own goal will help teach them to delay gratification, which is a valuable life skill.

  3. Give to charity. If this is something your family chooses to do, 10% is also a good baseline for determining how much to give to worthy causes or others in need. Developing this practice early can help your children grow into caring, empathetic adults.

  4. Spend the rest. If your child has any expenses, those should come from the remaining 80% of their income. If not, you can decide how much their weekly spend should be for toys, going out with friends, and other items they want.

When your child has developed a basic budget, challenge them to stick to it for a few months until they reach their short-term goal. Then you can revisit and discuss any needed changes to the budget. Maybe you start working with them on some longer-term goals like a car or college fund. By developing the discipline to save at a young age, your children can set themselves up for future success.

6. Introduce financial obligations

As your child gets older, consider giving them financial obligations, such as paying for their own cell phone or sports fees. Some parents take symbolic “rent" or other expenses from their teens and keep the funds in a savings plan for their kids to have later.


You can teach kids early to make smart money choices with GoHenry's debit card for kids and the fun, in-app education suite Money Missions.

Written by GoHenry Published May 9, 2022 ● 3 min. read