Among the many life skills we parents try to teach our kids, the ability to manage money is one of the most important. If you have a teenager at home, you may find they are much more interested in spending money than they are in learning to budget it. But teaching your teen the basics of budgeting money can set them up for financial independence and success throughout their lives. Whether your teen has a part-time job or an allowance from you, here’s how to help your teenager set up their own budget.
Teaching Your Teen About Budgeting
1. Determine Their Income
To help your teen set up their own budget, start by determining their income. Do they have an allowance at home? What about an after-school job? Can they do chores around the house to earn extra money?
If your teenager is too young for a job or too busy with after-school activities, consider giving them an allowance. Whether you decide on a straight allowance or payment for household chores, your teen needs to have some money in order to learn to manage it.
And learning to create a budget and manage their own money is an invaluable life skill.
2. Make a List of Expenses
Work with your teenager to create a list of monthly expenses. Do they have any bills of their own? For example, do they pay their own cell phone bill? Or pay for their car insurance?
After listing monthly expenses, make a list of irregular expenses. This includes gas for their car or a bus pass. Do they pay for their own clothes? Or school activities?
Are there any big expenses they want to save for? A car? Or a trip? Get it all out on paper so you can build it into your teen’s budget.
If your teen doesn’t currently cover any of their own expenses, now is a great time to start. Asking your teen to take over a necessary expense they have to budget for will be a powerful lesson in being responsible with money.
3. Create Budget Categories
Now is a good time to talk to your teenager about the difference between budgeting for the essentials and budgeting for the extras. Talk to your teen about budgeting money to cover their bills and required financial obligations before allocating money for entertainment or other non-essentials.
If you’re looking for a budget template designed with teenagers in mind, check out these worksheets. Working from a template makes creating a budget much easier.
You’ll want to create categories for necessary expenses as well as the fun stuff. And be sure to create a budget category for saving money!
Whether you teen is saving with a big goal in mind or just trying to build up a savings account, learning to set aside a portion of your income for the future is an important lesson in budgeting.
4. Start with Cash
When your teenager is first learning to budget, it’s a good idea to stick with cash. Plastic debit or credit cards might be common for adult spending, but they also make it easier to get into debt.
With cash, when the money is gone, it’s gone. It’s a powerful concept. And one it is essential for your teenager to grasp if you want them to learn to be successful with their own budget.
If you have an older teen with experience managing their money, talk to them about debit and credit cards. Make decisions based on what you feel they can handle. And monitor their spending and their card statements closely to make sure they are using them responsibly.
5. Talk About Real Life Spending
Teaching by example is a powerful way to convey lessons about budgeting to your teen. If you don’t currently have a budget for your own money, now might be a good time to create one.
Whatever system you use to manage your money, share it with your teen as much as you’re comfortable. Having your teenager sit with you while you sort and pay bills once in a while can give them real-world examples of managing money and living on a budget.
Your goal for helping your teenager set up their own budget is to teach them the money skills they need for life beyond your household. So show them how adults manage money and expenses. It’s a lesson they won’t forget.
6. Help Your Teen Reach Their Goals
Budgeting can be kind of a drag. If you’re a teenager with a few paychecks under your belt, chances are you’re eager to spend that money! But impulsive spending is a hard habit to break.
Helping your teenager set up their own budget shouldn’t be a negative experience. Make sure one of your budget categories is for fun money. A portion of their income they can spend as freely and impulsively as they want to.
But there should also be a category for saving. And this is where you can show your teenager the power of creating a budget. Help your teen set a financial goal for themselves. Do they want to buy a car? Or go on a big school trip? Or some other big purchase? Make a category to save for that specific goal.
Then help your teen make a plan and a timetable for achieving their financial goal. And celebrate their progress with them. Your enthusiasm and support towards their goal will make achieving it a meaningful financial lesson.