As parents, it's our responsibility to teach our kids the fundamentals of money management. One of the most crucial skills we can impart to them is budgeting. A budget is simply a plan for their money, and by teaching kids how to create one, we can help them establish a solid foundation for managing their finances. 

How pocket money can help teach your kids about money.

So where to begin? Start by asking them to answer these 5 questions:

Question 1: How much money do you have?

Ask your kids to calculate just how much money they have. This should include the pocket money you give them, any birthday or holiday money they've gotten and anything they may have saved up. Then, show them how to keep tabs on their money, so they always know how much they've got. 

Question 2: What do you need/want to spend money on?

Ask them to list all the things they may need to spend their money on. Of course, kids want everything. Now is an excellent time to introduce them to the difference between needs (what's essential for them to survive, like food and shelter) and wants (things they desire but don't need, like toys and games). See if they can correctly identify whether the lists are a need or a want. 

Question 3: How much will you spend on each thing?

Get them to figure out how much money each thing on their list costs. Then help them learn to work out how much they can spend, what they may have to forgo and how to keep track of where their money is going. 

See how Spriggy helps kids with smart spending habits.

Question 4: What do you want to save for?

Do they have something special they want to buy? Help them devise a clear plan to reach their goal ("If you save $3 a week from your pocket money, you'll be able to buy what you want by X date"). This will help them learn to put aside some of their money, and seeing their savings grow can be very motivating. 

Question 5: What happens if you run out of money?

If kids believe mum and dad will bail them out every time they run out of money, they'll never learn to make a budget work. Instead, help them understand and even experience the consequences of running out of money. It'll teach them to be more responsible. It's also a great opportunity to encourage kids to earn extra money by helping around the house. 

Budgeting is an essential life skill, and by helping your kids get started with it at an early age, you're helping them learn to manage their finances more effectively, more responsibly and how to avoid debt in the future. Encouraging them to track their finances, save for their goals, and be accountable for their spending will go a long way in setting them up for financial success later in life. 

Get started with helping your kids learn how to budget.