6 Ways to Teach Teens Budgeting Skills

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

Unfortunately, many teens earn their first paycheck or head off to college without any idea how to create a budget. Without budgeting skills, teens will struggle to save money and make wise financial decisions.

Knowing how to create and follow a budget is an important life skill. It can prevent your teen from going deeply into debt and it can help your teen create and reach her financial goals into adulthood.

Here's how you can teach your teen budgeting skills: 

1. Let Your Teen Handle a Lump Sum of Money

You don't have to wait until your teen has a job to teach her budgeting skills. Instead, you can give her the money you were going to spend on school supplies or clothes and give her some freedom over how she wants to spend it.

But, before your teen heads off to the store, sit down and create a budget. For example, if your teen is buying school clothes, determine how much she should spend on pants and how much she can spend on shoes.

You might agree that you're going to approve purchases before your teen buys them. This can prevent her from blowing the entire budget on a single pair of designer jeans. With guidance, your teen can learn the importance of spending money wisely

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.

This may give your teen extra incentive to save more money. So a teen with a job may be more motivated to save money if he knows you're willing to match his savings in June or if he knows you'll match the first $1,000 he earns. 

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.

A good rule is to tell your teen he needs to save 25 percent of his earnings. Then, help him establish a savings account and make sure he doesn't touch that money unless it's for an agreed upon purpose.

4. Create a Monthly Budget With Your Teen

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 how much money you make on social media.   

6. Review Your Teen’s Potential Future Budget  

Talk to your teen about his financial future. Review the salary range for jobs he's 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 cost. 

Make sure to discuss taxes too so your teen understands he won't actually bring home all the money he earns.

Discussing your teen's future budget can be a good reality check. It can show your teen how important it will be to monitor his budget closely.  

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