Do you want to help your teens be financially successful? Here is how you can teach budgeting to teens to set up them up for a prosperous future!
One of the best ways to prepare your teen to be a successful adult is to teach them how to manage money properly. This includes how to create (and stick to) a budget.
I wish I had been better prepared for being a financially responsible adult. I had a checking account as a teen, but I never remember learning specific steps to budgeting or why it’s important.
Now that I am a responsible adult, I can see how beneficial it would have been to start learning simple budgeting strategies as a teenager.
I have 2 little girls, and even though they are still quite young, I definitely want to better prepare them for managing money well. You can’t wait until your kids are in their late teens to start talking about money or teaching budgeting skills. Money conversations need to be ongoing throughout their lives (in age-appropriate ways).
Related: How to teach little kids about money
Why you need to teach budgeting to teens
You want to help your teen prepare for life, save for big purchases (car, travel, college), and start adult life with good financial habits. Budgeting is the first step in helping your teenager get there.
First, you need to make sure that you sit down and actually help your teen start a budget (and don’t just do it for them). This way they’ll learn how to do it themselves and you’ll be available to help guide them and help fix any mistakes.
Related: money management tips for teens
Advantages to starting a budget as a teen
Teaching your kids to start a budget when they are teens is great because:
- Teens have less income and fewer expenses – making budgeting easy!
- This will help prepare them for college or moving out on their own.
- If they make mistakes, you can help them.
- Budgeting together can provide great discussion opportunities for topics like:
- FOMO (Fear of Missing Out)
- Peer pressure/fitting in
- Needs vs. Wants
Budgeting for teens: 5 basic steps
Grab a notebook and help your teen start out with these 5 simple steps for a basic budget:
- Set a financial goal (short and/or long term)
- Record total monthly income
- Determine total expenses
- Subtract expenses from income
- Make a plan for the rest
Let’s talk about each of these steps a little bit.
- Set a financial goal (short and/or long term).
First, in the notebook on the first page, have your teen write down some financial goals.
- new cell phone
- money for college
- a fun activity with friends
This step is great because it requires your teen to think about the cost of the goal and how long it will take her to save money to reach it. If your teen can’t think of anything, help her create some goals.
On the second page of the notebook, write the month and year and draw a line down the middle. Write “income” on the left column and “expenses” on the right.
2. Record your teen’s total monthly income, including:
- wages from all jobs (including side jobs, like babysitting, etc.)
- gifts (birthday, Christmas, etc.)
Related: Help your teen prepare for their first job
3. Determine total expenses
Since your teen is still living at home, expenses will probably be minimal and easy to track.
Some expenses might be:
- cell phone bill
- car insurance
- eating out
- social activities
4. Subtract expenses from income
This amount is what your teen should have leftover at the end of the month.
5. Make a plan for the rest
Determine what to do with the leftover amount. This is a great time to talk about things like:
- setting financial goals
- having an emergency fund (and why you need one)
- saving for retirement (yes, even as a teen!)
- compound interest
- living debt-free
Related: Why you need an emergency fund
Related: How to graduate college with no debt
Related: 14 financial lessons teens should know
Don’t wait until your kids are 18 to start preparing them to manage money well and be financially responsible adults. Start early! Help them learn to budget by setting financial goals, tracking income and expenses and making a solid plan for what to do with any leftover money. Follow these easy steps to teach budgeting to teens and set them on the right path. Share your own tips for teaching teens how to budget and manage money!