Teaching Your Kids to Budget and Be Financially Responsible

The hoodie he HAD to have... 

School is fast approaching and that means back to school shopping! My kids and I love taking the day to shop for supplies, go out for lunch, and just spend time together. We always make a day of it and enjoy coming home with bags of new clothes, shoes, and supplies. It's fun right?! Well yes, but it also gets pretty expensive. And I only have two kids! Last year I spent way too much on new clothes and supplies for the kids, so this year I reevaluated how I approached back to school shopping. I couldn't be more glad I did!

I love the idea of introducing your kids to a budget and teaching them how to be financially responsible at a young age. You don't have to wait until your kids are heading off to college to instill these necessary skills. I'm sure some of you may already do this in the form of chores and a weekly allowance? That is one way to teach your kids financial responsibility! Kids realize that you have to work for your money, and they realize the more you work, the more you can earn! As far as my kids, and most kids I know, they believe money grows on trees and have no idea of just how much things really cost.

Kids have no concept of money unless you teach it to them. To begin our back to school shopping, I set a budget for each kiddo. The kids have more than enough clothes as is, are well taken care of and not lacking by any means. I decided their budget for back to school shopping this year was going to be $175 each. Something I think that is important is to be open and honest with your kids about what it takes for you to earn that money. Now, you don't have to go into detail and tell them your salary or what you bring home each month, but making them aware that it isn't just "free money" they're getting to spend. We are pretty open with our kids and will tell them "It took us __ hours of work to earn that $175". There's a reason we go to work each day and I think it's important that they realize our hard work is paying for their stuff.  We want them to realize that money is not just something we get... we have to earn it. We work hard for our money which is why we need to be smart about it, responsible, and stay on budget. Teaching kids these things early in life will better prepare them for when they are on their own.

This year before hitting the stores, I put $175 in two envelopes. One for each kid. I wrote their name on it and explained that this is their shopping money. This is all they get. They have to decide how to spend their money but also have to make sure they have everything required for school. Any money that they have left over goes into their saving account. I made this pretty clear because right away my 8 year old said, "I'm just going to buy the cheapest stuff so I can buy video games!" Wrong. This money is for school supplies and clothes, nothing else. Left over money, if there is any, goes into savings.

There was excitement to go shopping because to a kid $175 is a lot of money to spend! And it is a lot of money. BUT there was also the realized that they had to be "smart" with their money and couldn't just throw things in the cart like they prefer to do. They have to be responsible and accountable for their purchases. I'm mean aren't I? Turning something that is suppose to be fun and turn it into an educational experience. To help with their spending, I told the kids "my budget" would cover one pair of new shoes. Their $175 was to be used for school supplies, clothes and anything else they needed for school (no toys, sorry).

Before we took off shopping there were thing I wanted to cover and go through with the kids. We looked over their school supplies lists and talked about things that we could reuse from last year in order to save some money. Rulers, calculators, pencil cases, unused folders and scissors were all things that we had on hand and didn't need to repurchase! Score- their first money savings opportunity.

We then discussed the stores we wanted to shop at and other ways we could save money. We talked about comparing items in stores, looking at prices, and making sure we were getting the best deal. Do I get a name brand notebook for $4 or save and get a cheaper one for $1? A new backpack for $35 or can we use the one I had last year? $0.50 folders or $1.50 folders? How important is it to have those name brand items? By giving your kids the responsibility, putting them in charge of their spending, they will have to make these decisions and take ownership. What's more important? Name brand or saving money? Sometime name brand items (especially when it comes to clothing) can be more important to a kid than saving money, and that's okay as long as they have budgeted and allowed money for it.

One thing that was important to me is that the kids bought their required school supplies first. The more they saved on school supplies by reusing items from previous years and being smart with their money, allowed them to spend more on new clothing and extras. *Real life application right here: Just like in real life- there are things that have to be paid for before you can spend money on "fun stuff" or "extras". Things like your mortgage, groceries, electricity, etc. need to be paid for first before spending money on other things. You can't spend all your money on new clothes and not have any left for the required school supplies. New clothes is not required, it's just nice to have. Make sure your kids realize this.

Another thing that is hard for kids to understand is tax. We talked about how when calculating our items in the cart, that we needed to allow a little extra money to cover the tax on those items. One nice thing about shopping at Target is if you use your Target Red Card, you can save 5% automatically. The 5% saving helps offset some of the tax. Now, obviously if you choose to pay with a Target Red Card or another type of saving card, it takes the responsibility of handling the money out of your kids' hands. This is an option that you will have to weigh and decide. (*Note: I ended up paying for the kids' items on my Target Red Card to save them 5% and then just took the cash they spend out of each of their envelopes.) If you're interested in doing this with your own kids, this would be great to do during tax-free weekend because then you wouldn't have to worry about calucating tax! (I never shop tax-free weekend because I want to avoid the crowds and chaos even if it means missing out on the savings! I don't do Black Friday either... ha!)

Before hitting the store I grabbed a small calculator, notepad and pen. I wanted the kids to be able to keep track of their purchases and totals. I knew that shopping was going to take a little longer by requiring them to be in charge of their money, but I felt it was worth it. I also think there was a sense of pride and accomplishment when they got to take the money out of the envelope and pay for things by themselves.

Our first stop was Target for school supplies. Lucas ended up getting all his supplies for $20.63 and Natalie spent just $15.28. They were both off to a great start!

Decisions, Decisions... 

Shopping for clothes was another story... there were several times I had to question their choices and help them understand that they may not be making the best financial decision with their money. Lucas has expensive tastes and can care less about finding deals. His clothing style of choice: Under Armour. He only had $63 left to spend and had 4 Under Armour shirts picked out. Each shirt: $25. He says to me "Can't you just give me a little extra money?" Sure I could, but no I won't. We talked about our options and looked around the store some more. He was able to find some nice Under Armour shirts in a different section of the store for less. In the end, through lots of conversation, pouty faces, and compromise, he decided on 3 UA tops that fit within his budget.

*NOTE: The lady at Dillards was so nice! She was patient and helped Lucas as he counted his money. She treated him like a real customer and even asked him how he'd like to receive his receipt, electronic or paper copy! He chose a paper copy.

The $30 white tank top/shirt

This brings me to the $30 white tank top Natalie insisted on buying from Dillards. It's cute don't get me wrong, but $30 cute? I don't know... And a tank top isn't exactly something you can wear all year round, at least not here in Iowa. We talked for awhile and she was adamant she wanted to spend her money on it. I can't complain too much about the top since overall Natalie did very well about watching her money. She found some great deals and was eager to shop sale racks. Unlike Lucas, brands weren't her main focus, price was!  (She scored a shirt at Old Navy for just $1.98!)

In the end, Lucas got 6 shirts, 1 zip up hoodie (*sigh* I lost that one too), a couple pairs of jeans, and a pair of shorts. Natalie got 13 new tops/dresses, a couple pairs of jeans, and a couple pairs of leggings. Can you tell who was smarter with their money?! And yes, I realize my days of buying jeans from Old Navy, Justice, and Gap are limited. There will be a day when they want to spend $100+ on jeans. I understand what it's like to be a teenager. When that day comes, I will do just as I did today... "Here's X amount of money to spend. If you want something that costs more than what I have given you, you will have to pay for it on your own." I'm your mom and I love you, but I'm also not an ATM. Nothing wrong with having to work for something or earn it.

I asked the kids if they had fun and liked getting to be in charge of their own money and decide how they spent it. Natalie said "yes"! Lucas said "no". When I asked him why he didn't like it he said, "Because I didn't have any left to put into my savings account."

Overall I would say the day was a success. The kids got to be "grown ups" with their "own" money and we got to spend a fun day together!