Many well meaning parents try to keep their children sheltered from harsh realities of the family budget. Unfortunately, as much as these parents may mean well, their children often do not understand why they cannot have all of the nice things that their friends have. They also may grow up without learning to budget properly, and thinking that they can live the same way their parents did, but won’t know how to. The fact is, children do not learn about money on their own. They need to be guided, and teaching them about the family budget is a good way to start. You need to teach them little by little as they grow.
When they are very young, this is the time to teach them about choices. In any family, choices have to be made. Most of the time, it may be a choice between going out to dinner, or buying a new outfit. However, sometimes those choices get harder, as having to choose between paying a credit card bill or the electric bill. While your children don’t have to know about these choices just yet, they can just start by knowing that you don’t have (or won’t spend) the amount for two toys, and they may only choose one.
As they grow, you can actually give them a price limit on things that they want. This teaches them to budget their own money, and will help them to understand that there are limits on how much money is available. As an added bonus, it also helps them with their math skills, because if they want multiple items, they will have to add up the prices, and make sure that they have the budget for it. If they understand that their budget is limited, this is a good stepping stone to understanding that the family budget has limits.
*4th grade and up
By this time, your children are ready to face more of the realities of the family budget. You can still be gentle about how you tell them, but they will be better able to understand that the budget has limits. If one parent takes a pay cut, or loses a job, you will be able to explain to your child that there is not as much money available as there once was. You can even get them involved and as what they can do to help save money. Perhaps they can help by wearing some of their school clothes that still fit from the previous year, instead of getting a whole new wardrobe. They may be able to help more around the house so that their parents can rest more after work, and be able to get out of financial trouble faster. The key is not to underestimate a child’s willingness to help his/her family.
Children do need to understand the family budget no matter what. It will help them in the long run, and it will help you as well. While they cannot gain a full understanding from birth, you can gradually give them more knowledge as they understand more.