Module 6: Creating a Budget for Kids

FINANCIAL LITERACY LEARNING RESOURCES 

Budgeting Basics

Objective:In this lesson, children will learn the basics of creating a budget. They will explore how to plan their spending by prioritizing needs over wants. Understanding budgeting will help kids make smart financial decisions and manage their money wisely.

1. What is a Budget?

A budget is a simple plan that helps you manage your money. It shows you how much money you have, how much you plan to spend, and how much you want to save. A budget helps you make sure you don’t spend more money than you have and that you save enough for future goals.

2. Why is it Important to Have a Budget?

A budget helps you make smart choices about your money. It teaches you to plan ahead and think carefully before spending. Some of the benefits of creating a budget include:

• Control over your money: You know exactly how much you have and where it’s going.

• Achieving goals: A budget helps you save for things you want to buy in the future.

• Avoiding overspending: It helps you avoid spending all your money at once so that you have enough left for important things.

3. Understanding Needs vs. Wants

Before creating a budget, it’s important to understand the difference between needs and wants. This helps you prioritize what’s most important.

A. Needs

Needs are things you must have to live safely and comfortably. These include:

• Food: You need food to stay healthy.

• Clothes: You need clothes to stay warm and comfortable.

• Shelter: Having a safe place to live is important.

When making a budget, needs should always come first. They are the most important things to spend your money on.

B. Wants

Wants are things you enjoy but don’t necessarily need to survive. These include:

• Toys and video games

• Sweets or snacks

• New clothes (if you already have enough)

• Going to the movies or theme parks

It’s okay to spend money on things you want, but only after you’ve taken care of your needs and set aside some savings.

4. How to Create a Basic Budget

Creating a budget is easy once you understand your needs and wants. Here are the steps to help kids make a simple budget:

Step 1: Know Your Income

First, you need to know how much money you have. This could be money you get from:

• An allowance

• Chores or small jobs

• Gifts for birthdays or holidays

Write down how much money you receive regularly (e.g., weekly or monthly). This is your income.

Step 2: List Your Expenses

Next, think about how you want to spend your money. Make a list of the things you need to spend money on (needs) and the things you want to spend money on (wants). This is called your expenses.

For example, if you earn $20 a month, your expenses could look like this:

• Needs: $10 for school supplies or snacks

• Wants: $5 for toys or games

• Savings: $5 for future goals

Remember to separate your needs from your wants so that you can spend money wisely.

Step 3: Decide How Much to Save

It’s important to set aside money for savings. This will help you reach your future goals. You can choose to save a part of your income each time you earn money. For example, you could decide to save 10% to 20% of your income. If you earn $20, you could save $2 to $4 each time.

Saving regularly helps you build good habits and prepares you for future needs.

Step 4: Track Your Spending

Once you’ve created your budget, it’s important to stick to it. Keep track of what you spend your money on. If you spend more than you planned, you may need to adjust your budget. For example, if you spend all your money on wants, you might not have enough left for your needs or savings.

Step 5: Review Your Budget Regularly

Every week or month, take a look at your budget and see how well you’re doing. Ask yourself:

• Did I spend more than I planned?

• Did I save enough for my goal?

• Can I make changes to improve my budget?

By reviewing your budget regularly, you’ll learn how to make better financial decisions.

5. A Simple Budget Example for Kids

Let’s say you get $30 per month from chores and an allowance. Here’s how you can create a simple budget:

• Income:$30 total (from chores and allowance)

• Needs:$10 for school supplies and snacks

• Wants:$10 for a new toy or going to the movies

• Savings:$10 for future goals (like saving for a new bike)

This budget helps you balance your spending on things you need and want while also saving for something bigger.

6. Why Sticking to a Budget is Important

Creating a budget is just the first step. Sticking to your budget is how you learn to manage money responsibly. It can be tempting to spend all your money on wants, but sticking to your budget helps you:

• Stay focused on your goals

• Avoid impulse spending (buying things you don’t need right away)

• Feel more in control of your money

Budgeting is a skill that will help you throughout your life. The sooner you start, the better you’ll become at making smart financial choices.

Activity:Have the kids create their own budget. Give them a hypothetical income (e.g., $50 per month) and ask them to list their needs, wants, and how much they’ll save. Let them share their budgets with the class and explain their choices.

By the end of this lesson, kids will understand how to create a simple budget and the importance of balancing needs, wants, and savings. This will give them the tools they need to start managing their money wisely at an early age.