Young kids learn pretty quickly that it takes money to “get things”. They watch as their parents slide their credit card into the machine at the grocery store, give some cash to buy an item at the mall, and maybe send their kids to school with a check or cash for a purchase at school.
There is no reason to wait until your kids are teenagers (they might be ignoring you at that stage anyway) to start teaching them the fundamental skills of budgeting. You as a parent, certainly don’t need a degree in finance to give them some solid and practical lessons.
The objective is to allow them to earn money and then decide how to spend it. It does not need to be real currency, some families play with Monopoly money, but offer a small reward when a child has engaged in the learning and mastered some basic budgeting.
Using play money, you can chart your child’s starting balance, then add some real life events and subtract or add currency. For example, have your child do a chore, for which they receive a little money (keep the chores age appropriate). Then, show the child what happens when they have to purchase food, perhaps medicine, or attend a movie. Have your child be a decision maker in how the money is spent, triage the most important to least important so they can learn how to determine the best ways to spend and save.
As they get older, allowances are a great way to take what they have learned and turn it into a real life situation. Have them complete chores, or help around the house, maybe make dinner once a week, and in return they get an allowance to spend. They will continue to learn “oh no, I spent all the money on iTunes, so now I don’t have money to go to the movies with my friends).
Finally, get them excited by sharing stories about young people who have started businesses and thrived, so they can see that budgeting and finances aren’t just for “old people”.
Have fun!