1. Why talk about the Budget with your kids?
Talking to kids about the government’s Budget helps them realise that countries have to decide where to spend money, just as kids choose where to splash their pocket money.
Introducing the idea that people pay tax, which the government then spends, is also good preparation for later life. Understanding what tax money is used for can encourage children to think more about politics and how their votes can make a difference in future.
2. What is the Budget?
The Budget is when the government announces once a year how much money is coming in from people and businesses paying tax, and where it will be spent.
The Budget speech is given by the ‘Chancellor of the Exchequer’, who is the person who looks after the money for the whole country. It is the second biggest job in the government after the Prime Minister, who leads the whole country.
The Chancellor of the Exchequer comes up with the Budget by working with people in his office, which is known as the ‘Treasury’, and other politicians.
The Chancellor of the Exchequer giving the Budget speech on 3 March 2021 is called Rishi Sunak.
The ‘Exchequer’ in the job name ‘Chancellor of the Exchequer’ refers to the checked cloth used to calculate what taxes were owed and paid way back in the medieval period.
The Chancellor makes the speech to all the politicians in the House of Commons in London, but anyone who wants can watch it on TV, online via the UK Parliament’s YouTube channel or listen to it on the radio.
In the Budget speech, the Chancellor starts by explaining how the country is doing financially and what is expected to happen in future. Are businesses expected to do well or badly? How much money has the country borrowed and how will it pay that money back? How does our country compare to other countries? There’s lots to talk about, because the Covid-19 pandemic has cost the government a lot of money.
The Chancellor tots up how much money is coming in from taxes paid by people and businesses and proposes any tax changes. Some decisions are designed to change behaviour, such as charging extra tax on fizzy drinks so people drink less, or charging less tax on savings, to encourage people to save more.
The Chancellor then explains where the tax money will be spent, for example on the police, hospitals, schools, roads and helping people who are old or ill. The Budget speech will always include hard decisions because there is not enough money to pay for everything that everyone would like to include.
After the Budget speech, the leader of the politicians on the opposite side gets the chance to criticise it. Then all the members of Parliament can discuss it and vote on whether or not to accept to the plans in the Budget.
On Budget Day, the Chancellor of the Exchequer waves around a red briefcase containing a copy of his speech. In 1997, the Chancellor of the Exchequer, Gordon Brown, demanded a new red case. He thought the old briefcase, which was nearly 140 years old, was too tatty!
3. Talking to your kids about the Budget
We love a good chat at RoosterMoney, so here are some ideas to kick start conversations about budgeting with your child:
Who pays tax?
Ask your child to come up with ideas on who should pay tax. Tick off tax paid by people who have jobs, and tax paid by businesses that earn money too. Point out that your child is already a taxpayer. Pretty much everything they buy, from sweets and comics to books and toys, will include Value Added Tax (VAT) in the price. So 1p in every 5p they spend will go towards things like schools and hospitals.
Chancellor for the Day
Suggest your child becomes Chancellor of the Exchequer. Where would they spend the tax money? If they want to spend more on for example education and the environment, then where would they spend less? Should the government put taxes up, so it can spend more, or cut taxes, so people keep more of their own money?
Why did the Budget do that?
After the Budget speech, check the news to find out any big changes. Then talk about who benefits.
Are the changes for the good of the country – or to help the politicians get elected again?
4. Having some fun with it
We all learn best by doing, so here are some fun activities you can try:
Make a manifesto
Use a timer and give you child a couple of minutes to jot down as many things they think the Government should spend money on as possible. Afterwards, talk about switches: which are most important? Which should get least money or be scrapped altogether?
Get on board (games)
Get the family together for board games that include budgeting and spending choices, such as Monopoly, the Game of Life and Settlers of Catan.
Balancing your own budget
Get your child to plan their own budget, adding up the pocket money and any cash presents they might get, and working out where they might like to spend it.
Have you tried talking to your kids about money or the Budget? You can also check out our guide to talking to kids about budgeting in general here, along with how the RoosterMoney app can help. Let us know how you get on at email@example.com or tag us on our social channels.