6 Ways to Teach Teens Budgeting Skills

475077571.jpg
Teach your teen how to wisely save and spend money. David Franklin/ Photographer's Choice/Getty Images

Unfortunately, many teens go to college or obtain their first real job without any knowledge about how to establish a budget. It's important to help teens estabish budgeting skills now so they can have time to practice good saving and spending habits.

1. Let Your Teen Decide How to Spend a Lump Sum  

Instead of purchasing things for your teen, give your teen the cash and help him determine how to spend it.

For example, instead of buying him clothing for school, establish a budget for your teen and let him purchase his own clothing with the agreement that you will need to approve his purchases. This can help a teen learn the importance of shopping sales or making sure he doesn’t spend the entire budget on one pair of designer jeans.  

If you plan to pay for a special event, like the prom, you can also set a budget and then help your teen decide how to spend those funds. Help your teen decide how to allocate the money to ensure that all expenses are paid for.  

2. Match Your Teen’s Savings for a Big Ticket Item  

If you plan to help your teen purchase a car or another big ticket item, agree to match the amount of money your teen is able to save by a certain date or up to a certain dollar amount. It can give your teen extra incentive to save money.  

Teaching Teens Financial Skills

3. Establish Rules About Saving   

Create rules about how your teen saves and spends money. Establish a certain amount of money that must be put into savings. Set your teen up with a bank account and ensure that he places at least 25% of his earnings into a savings account.    

Establishing Rules for Teens

4. Help Your Teen Establish a MonthlyBudget  

Whether your teen earns an allowance or has a part-time job, work together on establishing a monthly budget. Discuss how much money he’ll need for gas, clothing, entertainment and other expenses that you won’t be paying for. Then, help him figure out how to set aside money to pay for the items on his list.   

Allow for natural consequences when necessary. For example, if your teen has spent all of his money and then he wants to go to the movies with some friends, a natural consequence is that he can’t afford to go. If you always give him extra money or bail him out he won’t learn to budget better in the future.  

5. Discuss Your Budget  

Sometimes parents don’t feel comfortable discussing their incomes or expenses with their kids. But, talking about your own budget can be one of the best ways for teens to learn about real-life expenses. If you’ve made some mistakes with your budget and have problems with debt, be honest with your teen. Explain some of the mistakes you’ve made and why your spending has been a problem.  

Of course, it’s important to have conversations with your teen about privacy and keeping financial matters private. The last thing you want is for your teen announcing on social media how much money you make or how much debt you owe.   

How to Talk to Teens About Difficult Subjects

6. Review Your Teen’s Potential Future Budget  

Talk to your teen about his financial future. Review the likely income for a few jobs he may be interested in. Then, discuss the average rent or house payment in the area where he might live and discuss how much other expenses cost, like utilities. Help your teen understand how much of his salary will be paid for taxes as well.  

This can be a very helpful exercise for teens to see how many bills need to be paid. Sometimes, teens think they’ll be rich once they begin working a full-time job and they don’t have a concept about how expense many necessities, like groceries actually are. It can be a good reality check for teens about the importance of monitoring a budget closely in order to be able to save for things that they want, but don’t necessarily need.  

Help Your Teen Graduate From College Debt Free (Even If You Can't Pay)

Continue Reading