Inside: Teaching teens to budget is an important life skill. Here are some tips and tools to teaching teens about budgeting and saving.
As a parent, you know that as your children move into their tweens and teens, teaching them how to budget is an important life skill lesson that needs to happen. It would be great if basic money management, including budgeting, was taught at school. It seems like one of those things no high school student should be able to graduate without, but NOPE!
The concept of money is typically introduced in elementary schools in or around the second grade. However, from this age forward, schools don’t require students to take a financial literacy course before graduating from high school. As of May 2023, only fifteen states in the U.S. guarantee all high schoolers take at least one personal finance class.
So, this means that that it is up to you. It may feel a little overwhelming considering everything that is on your plate. But the risks of not teaching your teen about budgeting early could result in your teen making bad purchase decisions, taking on crushing debt, and suffering other negative consequences as they enter into adulthood.
However, if you think about it, you are managing your money and working within a budget everyday, you just need to start to talk about it more with your teen and provide more transparency.
Budgeting Lessons For Teens In Every Day Life
Almost every day as you are out and about, you are spending money. Maybe it is at the grocery store, the gas station, or even splurging on your favorite cup of coffee on your way to work. Many of these transactions your teen(s) sees, but you’re generally not making sure your teen is paying attention to the actual costs of these things or talking about how each of these expenses fits within your budget.
This is true of the general day to day of running your household as well. You most likely pay bills regularly, put money in savings or plan for future expenses. What you’re most likely not doing is have regular conversations with your tween or teen about what you earn, how much you are having to pay for each of those bills, how much you are saving and why, how you are planning for anticipated expenses and then how all of this impacts those everyday things they see you buying.
For tweens and teens, the concept of spending money is not unfamiliar. However, they often don’t fully understand or appreciate the value of a dollar. They don’t have context to understand if something is expensive or just how expensive. And they definitely have a hard time distinguishing between a need and a want.
This is why it is so important that you talk about and model healthy spending and saving habits with your teen and teach them how to budget and make informed financial decisions. This is a life skill that is crucial to have developed before heading out on their own.
When Should I Teach My Teen How To Budget
The best years to begin teaching the concept of budgeting is arguably in the tween years, at an age when spending decisions take root.
Instead of just handing over money to your tween for the movies or the latest must have fashion, help them understand where the money is coming from and show them how to respect money both in how it is earned and how they should spend it.
Budgeting does not have to start with a first paycheck, especially since many tweens and teens are so over scheduled with school and activities that fewer and fewer even hold jobs today. Start with an allowance or even just giving them a parent controlled debit card like Greenlight or using Apple Pay with a set amount per week or month that they then have to manage for essentials such as:
- social outings with friends
- snacks and school lunches
- clothes
- Birthday gifts for friends
- Extras (make-up, video games, in-app purchases, etc)
- Savings for bigger wants/needs (college, a car, a school trip)
Ultimately, you decide what expenses you want to make them responsible for managing relative to what their allowance or the amount your giving them for a set period of time can reasonably cover. Be fair and realistic with this exercise and determine just what lessons you want them to learn. You want to make sure that they will have to make thoughtful decisions about how much they spend on certain items and ensure that they’ll probably have to make some trade-offs to balance needs and wants.
Also, when they receive cash gifts for holidays and birthdays, help them set a reasonable amount to spend and to save (it might all go to savings if you’re already giving them money for spending). Part of having them save should be setting a goal to help them pay for something in the future. This could be a more immediate and smaller expense like a gaming system or a trendy pair of shoes or it might be a larger and more long term goal like a car or college. It could even be both!
Any of these approaches encourages tweens to start making wise spending and saving decisions early. It is in these early adolescent years when learning how to budget will become a core value that is practiced in future everyday financial making decisions.
So how do you start?
How to Teach Your Tween How To Budget
Be a Role Model – The best way to encourage wise spending and saving habits is to be a good role model. Allow your teens and tween to see how the family manages savings, and expenses, and has room for a little extra. Spending money can be fun but that is after necessities are covered, then explain the percentages of how much should be allotted.
Let Them Use Their Money – Give your tweens and teens the opportunity to earn extra cash by performing chores around the house or incentivize them to get a part-time gig such as a dog sitter or mowing the lawn. When the money they are spending suddenly is THEIR money, they will take these lessons more seriously.
Related: Greenlight Debit Card – Teaching Teens How To Manage Money Made Easy
Give Examples – Show them real-world examples such as how far a paycheck goes to cover bills, how much is saved, and what is allocated to groceries and other needs. Get them interested in learning where the extra money goes and how it can amount to covering expenses for exciting things like a vacation.
Make it Fun and Celebrate the Wins! – There will be many learning lessons in understanding how to save and budget, but remember that all victories should be celebrated, and losses learned. This learning curve will set the foundation for future decisions so should be treated seriously, but mostly as a fun and exciting opportunity.
Set Goals For Them And See Where It Leads! – Next time they come to you wanting an expensive new pair of tennis shoes, the latest video game to be released or some other fairly large expense, help them to create a plan to save enough money to buy it themselves. Talk to them about doing extra chores around the house, or helping a neighbor or setting aside a portion of their allowance each week. You might even consider matching a percentage of what they save to give them an incentive.
Tools To Help Tweens and Teens With Budgeting:
Greenlight – With automated allowance, in-app chore lists, and real-time parent notifications, Greenlight teaches financial lessons while keeping parents informed. A MasterCard debit card is available to let kids spend where they want, with the option of flexible parental controls — even allowing you to set store-specific spending controls.
Budget Binder – Amazon has budget binders that provide a tangible way to let your teens and tween save their cash and make decisions to allot a certain amount into separate organizers.
Mint – Intuit Mint asks users to connect their bank and investment accounts to the app in a simple and fast method that tracks every dollar and how it is saved, spent, and invested.
You Need a Budget – YNAB is a powerful budgeting app that focuses on the concept of giving every dollar a job. It encourages users to allocate their income into various categories and helps them track their spending accordingly. YNAB provides real-time updates, goal tracking, and educational resources to support users in building healthy financial habits.
GoalSetter – Goalsetter is a savings app for teens that combines financial education with goal setting. It enables teens to save money toward specific goals, such as buying a car, going to college, or starting a business. Goalsetter offers quizzes, challenges, and lessons on money management to help teens develop good saving habits.
What If My Teen Does Not What To Learn
Motivate your teen or tween with exciting challenges that encourage them to learn. This topic may seem boring to some but make it fun by bringing it to life! A great way to do this is by introducing them to investing, a complimentary topic to budgeting.
For example, you could download the Robinhood app and put in $20 see how far that goes and if it grows to over $50 take it out and spend it on something they would want like a gift card. Show your child how these decisions online have real-world weight to them. Small rewards like these become positive and encouraging memories that greatly affect future money-making decisions.
I Didn’t Start Early Is It Too Late
It is never too late to teach your teen about budgeting. Budgeting is helpful in more than just teaching about spending and saving money. Explain how budgeting allows you to keep track of income, and spending decisions, helping in goal setting or limiting risky spending.
In the later high school years, teens are more likely to have a job, so start when they begin making their own money. You can discuss how they now need to use that money to cover their own expenses like gas, clothes and dates.
This is also when college costs might be looming and they’ll need to begin planning for how they are going to cover their part of expenses. Lastly, this is also when you can start talking with them about bigger life costs that will be heading their way soon like buying a home and starting a retirement account. It’s never too late to start teaching your teens the importance of budgeting and saving.
Learning how to budget should be a fun and exciting time. Give your teen these skills and watch as they earn that feeling of independence. Once they make their own purchase decisions, this will incentivize them to want to continue these healthy habits. In teaching them how budget you are helping them build their financial future with a strong foundation.
Parenting teens and tweens is hard, but these popular posts other parents found helpful might just make it a little easier.
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