Budgeting for kids

This week end I spent some time with the kids to show them how to create their very first budget.

I'm not sure how many people actually have a budget, this is not something we learn at school and most people seem to think this is quite boring. But if done right I think it can really help focusing our money on what matters.

On my side I'm using an application called You Need a Budget (YNAB) and this app allows you to invite additional people to your account. I used that create a budget for each of kids and invited them to their budget so they can see it and manage it themselves.

My kids are still young (9 and 10) so I've kept the budget very simple and focused on the key things I want to teach them about money. They get 5 euros each every week and what I've asked them to do is to decide how much they want to allocate to:

1. giving: saving some money to give to others, for example to buy a birthday present to their sibling or to a friend
2. saving: keep some money for themselves for later
3. spending: use some of the money for themselves now or soon, to buy toys, etc.

This is what my son decided to do with his money

My son is a good saver, with the 5 euros he gets every week, he's accumulated more than 700 euros. So this is how he's decided to organise his budget:

1. gifts: he's allocated ~115 euros to gifts for his sister and friends and he's adding 4 euros (20%) per month to this category
2. video games: he kept 60 euros for his next video game, he's not decided yet what it will be and he adds 4 euros (20%) per month to his video games category
3. fun money: this is to buy other things than video games, he's kept about 75 euros for that and adds 5 euros per month (25%)
4. investments: finally I've been telling him quite a lot about stocks, ETFs and investments and he's decided to buy some ETFs for about 520 euros. He's contributing 6 euros per month to this category (30%). I personally think that learning early about investing is really important (so they can see by themselves how the stock market fluctuates, follow the value of their portfolio, and understand that it's really not that difficult). To further encourage them I told them that I'll contribute 20% on top of what they buy.

I put together a budget separately with my daughter and she came up with something very similar.

Tomorrow we will be buying their very first index funds ETFs, they're very excited. I told them that they should think about them as little guys who will be working for them, giving them a little bit more money over time. The more little guys they get, the more they will multiple.

In case you want to do something similar for your kids (or for you 🤣) at some stage, this is how I've set this up for them:

1. I've got an online bank account with N26
2. I created a space for each of them. Spaces are a bit like a separate bank account that I can manage for them. This is quite neat as it keeps their money segregated and we can see all the transactions separately (what they received, what they've sent)
3. I setup an automated weekly transfer of 5 euros for each of them (from my main account to their space)
4. each time they want to buy something, my wife or I pay for the item and we then transfer the money from their space to our own account
5. In YNAB (the budgetting app), I created a budget for each of them
6. I invited them to their own budget and installed the app on their iPad so they can see how much money they have and manage the budget themselves
7. YNAB automatically links to many bank accounts but they don't have an integration for N26 yet. So I spent a few hours to do the integration myself and used a bank API provider and the YNAB API to automatically synchronise the transactions for all our accounts (yeah, it's useful to know how to code. But don'w worry if you can't, ChatGPT and other AIs will soon be able to do it for you..!).