Teaching Teens to Budget

One of the most powerful things to be able to do is to track where your money goes, and that starts with budgeting. Explore some of the key budgeting basics.

Track Spending

Budgeting allows them to track their spending and manage their money.

It is important a young person sees from where their money comes and to where it leaves. Over the course of a month, have your teen record each and every purchase so they can better visualize their spending. According to the American Institute of Certified Public Accountants, showing your child how to save and calculate receipts is one way to help them keep their spending on track. 

Identify Income

Help them identify their income sources.

Will they be spending money from a monthly allowance, financial aid, or wages from their job? Help them understand the importance of planning – Have them write down their monthly expenses like rent, laundry, food and monthly bills. Talk to them about unexpected or emergency costs and the prudence of establishing a “safety net” savings account. 

Be a Role Model

When it comes to money habits, Aliche says, “There is no barometer for teens, therefore normalize good money habits for them.”

Budgeting is a tool and if you show them how you use it habitually it will become second nature to them, too. She says when it comes to money behaviors kids take their cues from their parents; being a good example of healthy financial habits is the best teaching you can provide. A couple of ways to do this can be to pair financial lessons with what’s important to them and by doing your bills in front of them.

Emphasize Saving and Giving

Another key component to budgeting is saving. When young people save, Aliche says that it helps them build towards wealth.

A helpful way to do this is to create “spend,” “save,” and “give” accounts. Percentages of the money your teen saves can be deposited in their bank account, be invested, donated or spent on their financial responsibilities and fun. 

Aliche recommends the following percentage allocations for deposits into each account:

While your teen’s commitments and obligations may change, specifying percentage goals for their money is a great way for them to stay on track. 

Consider Digital Help

Not everything has to be done on paper. In fact, there are an array of mobile apps and websites that can help with budgeting, saving, and keeping track of all your finances.

These mobile apps can help your teen stay on top of their money spending habits while they’re on the go.

Mint – Has a website and mobile app that allows you to create budgets, track spending by category, and provides personalized tips and advice about your money. The app can be linked to your bank, credit, and loan accounts and updates automatically. 

GoodBudget – Mocks envelope budgeting. If you and your teen are splitting some expenses, this might be a good fit. Within the app, your teen can share their budget with you through their cloud technology. 

Prosper Daily – Helps with budgeting and to protect credit and debit cards from fraud and error. The app links to accounts and shows analytics from every transaction made. 

As you and your teen plan for their finances after high school remember that you are their financial advisors and examples. What you teach them, and how you handle your own money, will help them when they are on their own.

 

 

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