Generally, expenses include any money you spend on goods and services. For most people, expenses include expensive needs like mortgage or rent and wants like eating out and shopping. Expenses show how much money you spend and are an important part of managing your money.
Wants vs. needs
A simple way to separate expenses and help your child learn how to budget on their own is to discuss wants and needs. Needs are non-negotiable expenses that must be paid. Wants are expenses that you may not need but want to fit into your budget. Teach kids to prioritize needs while leaving room for some wants. Help your child understand their own wants and needs, or talk about examples using the list below.
What are needed expenses?
- Mortgage or rent
What are wanted expenses?
- Shopping trips
- Going out with friends
- New toys or games
How to budget for expenses
When you make a plan for what you want to do with your money, expenses will be a significant part of your budget. Any spending you need to do with your income falls under expenses, and you’ll need to plan your money for the expenses you need most. Some expenses are the same every month while others vary. Teach kids how to manage their money and plan for both.
What are fixed expenses?
Fixed expenses stay the same every time you pay them and get paid regularly. Most fixed expenses are monthly payments like rent or a car payment. Streaming services like Amazon Prime, Hulu, and Spotify are fixed expenses as well. As your child learns how to budget, show them how to include fixed expenses in their budget every month.
What are variable expenses?
Variable expenses don’t stay the same month to month and can be more challenging to plan. For example, utility bills can change each month depending on usage. More general spending categories like eating out and entertainment can be variable expenses as well. Teach your kid how to plan for variable expenses and leave room in their budget for bills that can change each month.
What are expenses for children?
Kids, especially young children, have most of their needs and wants met at home and don’t need to worry about expenses yet. As you begin teaching your child the importance of money and how to pay for things they need, make it relatable. Teach kids what it takes to pay for the new toy or game they want. You can help them save for a new toy or plan out how they want to spend an allowance. Introduce them to expenses and good money habits now to help them manage their money well in the future.
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