Smart Spending: A Guide for Kids

Whether you earn cash from a weekly allowance, neighborhood jobs, or birthday and holiday gifts, you want to make the most of your money when it’s time to spend it. Smart spending means budgeting for what you need or really want, shopping around for the best value, and avoiding impulse buys you might regret later.

Here are some key things to know.

What Do You Need and What Do You Want?

When you’re young, your parents take care of most of your actual needs, like your home, food, clothing, and such. But they also want to prepare you to take care of yourself when you’re an adult. So be successful financially, one of the most important ideas you’ll need to understand is the difference between “needs” and “wants.” Think of it this way: say, you need a shirt, but you want your favorite band’s concert shirt. Often, the fancier thing you want costs more than the basic thing you need.

Or, you may think you need a new bike to get to school, but you could actually walk to school if you don’t have the money to buy a bike or you might only be able to afford a second-hand bike, not a new one. This is where budgeting comes in.

Budgeting and Saving: A Game Plan for Your Money

Creating a budget and saving plan helps you map out what you want to do with your money and how to get there. When you get older and have a whole household to manage, it gets more complicated, but learning and practicing these simple steps is a great place to start:

1. Track your income. Income is the money that comes in when you earn it. List what you already have saved up from chores, neighborhood jobs, or birthday gifts, and map out what additional money you’re likely to bring in weekly or monthly, like from an allowance or babysitting.
2. Identify your expenses. Your expenses are anything you intend to spend money on. They include lower-cost day-to-day things, like the smoothies you pick up after school with your friends, as well as higher-priced items like a new bike you’ll need to save up to purchase, or maybe pricey concert tickets.
3. Create a plan to cover your expenses and save for other things you want. This is what a budget is – a spending plan where you specify how much of your income you will devote to day-to-day items like your smoothies, and how much you’ll set aside in savings for that new bike or concert tickets.

If the money you have coming in doesn’t match what you plan to spend, you’ll need to either find ways to earn more (your parents may have some ideas on that) or make some difficult spending choices. You might, for example, decide to cut back on the smoothies, so you can save up more for the bike. Or, after looking at the numbers, you might decide that a lower-cost second-hand bike will suit you just fine.

Smart Spending Strategies

Almost nobody has so much money that they never have to make choices to spend on certain things and not spend on others. So, it’s good to learn some simple but practical ways to help ensure you’re making good decisions with your money.

1. Think before you buy. Ask yourself: is this purchase worth it? Will a bike or those guitar lessons make you happier than a high-priced new device?
2. Set spending limits. Decide how much you want to spend on certain things – like snacks, activities with friends, or new clothes – and then track your spending to help you stick to those limits.
3. Consider the item’s, or activity’s, value. Should you buy a less-expensive scooter or bike that you can afford now but that may be more likely to break easily or save up for a while to get one that might be of a higher quality?
4. Shop around and look for deals. Technology makes it easy to compare prices and find discount codes, coupons, and deals.
5. Wait before you buy. If you’re thinking of buying something big, give yourself an extra day or two to consider whether the item or activity is worth your money.

How to Avoid Impulse Buys

Do you know why stores put so many fun things by the checkout line? Because they want adults and kids alike to make impulse purchases – the things you buy without planning for them. These “impulse buys” can add up quickly and can throw off anyone’s budget, so use these tips to avoid the impulse trap:

• Remember, you’re more likely to spend money impulsively if you’re feeling stressed or sad or if your friends are encouraging the purchase, so don’t head to the store or shop online if you’re feeling bored, stressed, or very emotional.
• Create a shopping or activity list and stick to it.
• Only bring the cash you need for what you set out to buy or do, plus a little extra for emergencies.
• Find ways to have fun that don’t always involve spending money.

You Can Be a Smart Spender!

Smart spending starts with understanding the difference between your needs and wants, taking time to budget and plan your spending, and considering each purchase’s value. Getting started with good spending habits now will set you up for a lifetime of financial stability. Of course, there’s always more to learn about earning money, saving, and reaching financial goals. We’re happy to help you become a pro at managing money, and we encourage you and your parents to reach out!