Holiday budgeting lessons for kids

Mom and two daughters in a doughnut shop
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Finding the perfect gift to light up someone’s face is one of the joys of the holiday shopping season. It’s also a great opportunity to teach kids about the importance of giving.

But as we race through the shopping aisles, filling our carts and pulling out our cards at the register, what lessons are we teaching them about money?

“Parents are the number one influence on their children’s financial behaviors, so it’s up to us to raise a generation of mindful consumers, investors, savers, and givers,” says best-selling finance author Beth Kobliner. Yet one in five parents have never spoken to their kids about the fundamentals of money, regardless of whether their kids are preschoolers or high school graduates.

You might think your child is too young to grasp such abstract concepts as money, but you might be surprised. Kids as young as three years old can learn the basics like spending and saving. That means they’re also old enough to start forming misconceptions about money. If you’re not talking to them about it, “they may be drawing the wrong conclusions,” says financial planner Stuart Ritter.

Since kids form their money habits by age 7, there’s no time to lose. It’s never too early to begin teaching them fundamental lessons such as:

  • Saving money now brings a future reward.
  • There's never enough money to buy everything you want.
  • Sometimes you have to wait before buying something you want.
  • Spending less on some things means you have more money for others.
  • Keeping track of your money gives you power.

Financial lessons in holiday gift-giving

In the midst of the holiday shopping frenzy, when you’re rushing to check off as many items from your list as possible, it’s easy to send kids mixed messages about money. It’s also an excellent time to start teaching them lifelong money managing habits.

Spend, save, share. One of the simplest ways to teach kids about budgeting and saving is to use the spend, save, share model. Create three jars: one to spend right away, one to save for the future and one to share with others. Determine how much of your child’s money should be allocated to each jar. For example, 40 percent might be for spending, 50 percent for saving and 10 percent to give to help people or causes your child cares about. When your child receives holiday gift money, help them divide it between the three jars—and spend time talking about the importance of each. As the savings jar fills up, you can bring your child to one of our branch locations to deposit it into a Lucky Duck Savings Account.

Saving for a gift. Kids naturally understand the spirit of giving and take great joy and pride in giving gifts they bought with their own money. Holiday gift giving offers the perfect opportunity to teach your child about saving for short-term goals. Set an achievable budget and help your child set aside a portion of his or her allowance each week to buy a gift for someone special.

Setting a shopping budget. Letting kids participate in your family’s financial planning “rewards them with important tools they'll need later in life,” says Lifehacker. If you’re shopping on a budget this holiday season, talk with your child about setting dollar limit for each person and ask for their help to stick to it. Let younger kids help select from options within the price range, while older kids can help keep track of how much you’ve spent so far. Discuss the tradeoffs you have to make to stay within your budget—for example, “if we buy this, we can’t buy that.”

Apps for developing money skills

Most of us use debit or credit cards to pay for things, which can confuse kids about the value of money. When kids don’t see physical cash being counted out, they may have a hard time wrapping their brains around how much things cost. Twenty dollars looks exactly the same as $200 when you’re using a card at check out.

“Money management can really be an abstract concept,” says parent Jennie Cogbill. “I don’t ever carry cash, so trying to explain the cost and ultimately the value of things like shoes or sports equipment is tough.”

To compensate, many parents are turning to apps to help teach their kids about finances. And why not? When they grow up, they’ll manage their money primarily through apps and websites—you’re just giving them a head start.

Bankaroo. Developed by an 11-year-old girl, this free app serves as a virtual bank, allowing kids to input their allowance amount, set goals and allocate funds. Since it’s not actually tied to a bank account, it’s a safe way to help them develop online banking skills.

PiggyBot. Don’t have cash on hand to pay your child’s allowance? This allowance tracker lets you pay it virtually by adding money to your child’s account. It’s like a digital IOU, which your child can cash in anytime you choose. Plus, it automatically divides your child’s allowance into spending, saving and sharing buckets.

Teaching kids how to manage their money isn’t as hard as it sounds. The holiday season offers plenty of opportunities to teach valuable lessons about sharing, saving and budgeting. And the gift of financial literacy? Priceless.