What Is an Expense?
Money going out — the other half of the picture.
What is an expense?
An expense is money you use to pay for something — buying it, or paying for a service.
What counts as an expense?
Any time you pay for something, that's an expense — for example:
A toy
Something you want.
Food
Something you need.
An activity
A fun outing.
School supplies
For learning.
What isn't an expense
Not everything that happens to your money is an expense. Moving $2 from your Spend jar into your Save jar isn't spending it — the money is still yours, just kept somewhere else. Giving money away is a little different again, and that's its own lesson.
For now, the simple rule is: an expense is money you use to pay for something.
Needs and wants
Some expenses are things we need — like food or school supplies. Others are things we want — like a toy, a game, or a fun outing. Both are real expenses; there's just a difference between them, and that's a lesson of its own coming later.
Spending means choosing
Every time you spend money, you have less of it available for anything else.
What else could you have done with that $6?
Money in, money out
Understanding both sides is what makes budgeting possible later on.
Think about it
Have a go at these before checking the answer.
You have $5 and buy a $3 toy. What is the expense?
$3 — that's the money you used to pay for the toy.
You receive $5 pocket money. Is that an expense?
No. Money coming in is income, not an expense — an expense is money going out.
You save $2 in your Save jar. Is that an expense?
No. The money is still yours — you've just kept it, not spent it.
You spend $2 on an ice cream. What happened to your money?
You traded $2 for the ice cream — you now have $2 less, and an ice cream instead.
Grown-ups have lots of expenses too — some regular, like rent or power bills, and some unexpected, like fixing something that breaks. Balancing income and expenses is a big part of what a budget is for, which is a lesson of its own.
Seeing money leave your hands
For young children especially, physically handing over coins can make the connection between spending and having less money really click — in a way a number on a screen doesn't always manage on its own.
Give your child $5 in $1 coins, and let them choose something to spend $2 on. Then ask:
- How much did you have?
- How much did you spend?
- How much do you have now?
- What else could you have done with the $2?
Where to next
Now you know about money coming in and money going out. The next step is learning how to make choices about where your money goes.
For the full real-world system this is based on — $5 a week, physical jars, and a savings goal your child chooses — see the pocket-money guide.
Next lesson: Coins & Notes
Now that income and expenses make sense, let's look at what physical money actually looks like.