If you struggled to learn how to budget in your adulthood, you probably wish your parents had walked you through budgeting basics when you were young. Now that you are starting to raise small humans of your own, you should start thinking about how you are going to impart your money management wisdom and set them up for lifetime financial success.

Like most complex topics, money is best introduced to kids when they are young, so they have a strong foundation of financial literacy. However, budgeting is a tough concept for little minds to grasp — so how should you go about teaching your toddlers how to save and spend?

Give Them Someplace to Collect Money

As soon as your baby masters the hand-eye coordination to grasp a coin and put it in a slot, you should give them someplace to start collecting money. Though piggy banks are cute, you should opt for something transparent, which allows your little one to see the coins stacking up as they place more inside.

Becoming comfortable seeing, handling and saving money are some of the first and most fundamental financial skills for children to gain. If you don’t tend to have loose coins around for your toddler to find and collect, you might find other ways to give them money to stash away, like paying them for completing small, toddler chores (like putting their toys away or cleaning up after a meal) or gift them small sums for minor holidays.

Let Them Purchase Things With Your Cash and Card

Making purchases can be intimidating for youngsters — but it is less-so when they have been doing it since before they can remember. Though you shouldn’t let them run amok with your emergency savings, you might let them hold and use your payment method while you are checking out at the grocery store. This will get them accustomed to the process of using different methods of payment and hopefully make interacting with cashiers a bit less stressful.

As your kid gets older, you might start asking them to pay for portions of the things they want. For instance, if they are desperate to try the latest sugary cereal, you might require them to pay for half of the box. Alternatively, if they want a certain toy (and a gift-giving holiday isn’t fast approaching) you might ask them to supply 25 percent of the funds. This will help your child assign more value to their things and recognize the power of the dollar.

Show Them Your Budget and Make Theirs Together

Children, especially toddlers, learn best by following your example. From the time they can crawl, they will try to emulate your behavior — which might mean trying to do dishes, clambering onto the couch or staring intently at your smartphone. This is why modeling smart financial practices is perhaps the most impactful thing you can do as a parent; it shows kids, rather than telling them, how important financial literacy can be.

However, your child will never see your budget unless you show it to them. When you are using your budgeting software, you should show your little one what you are doing and explain why. When they are old enough to begin managing the money they have saved, you might work together in the same program to build a small budget for them. You should talk about your financial goals, the financial goals for your household and their financial goals, in the short and long term. You might open conversations about big future expenses, like cars or college, so they can begin to develop a bigger financial picture.

In truth, most money matters are a bit too abstract for young children to fully grasp. Toddlers are better at learning about things they can see and grasp, which is why you shouldn’t hesitate to let them hold, use and collect money. However, children grow quickly, so you should be prepared to introduce more complex financial issues when your kid is ready. Most importantly, you need to be an impeccable financial role model because that is what will establish your child’s financial foundation and establish their money management worldview for the rest of their life. 

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