Teaching Good Budgeting Habits To Teens
Posted: November 19, 2020 in Achieving Financial Goals
With today's complex digital economy, teenagers need to learn financial literacy sooner than ever. It's no longer uncommon for minors to have pre-paid credit cards or starter checking accounts with debit cards to facilitate online shopping, and most parents and grandparents rightly view this as an opportunity to instill good financial habits early.
It's not like teens are free from expenses, either. Whether it's saving for a car or funding the gear needed for a favorite sport, there are a lot of costs to cover, and getting your kids invested in saving for these types of items is an important part of setting them up for success as an adult. So how do you start the conversation about budgeting?
How To Start a Budget as a Teen
The first step to teaching teenagers about budgeting is understanding what goes into their budget. Budgeting for teens can mean a lot of things depending on their age and goals, and there's no one-size-fits-all guide. It's important to have family conversations about the goals your kids have so your lessons are relevant to their financial planning in the near-term.
Keeping that in mind, it's also important to do some research ahead of time so you can anticipate needs and provide information as they arise, so it helps if you learn the ins and outs of the most common budgeting needs teens have, from 13-year-olds saving their babysitting money for the movie theatre with friends to college students taking the reins on their finances as they move into adulthood.
- Vehicle and transportation costs
- Educational expenses for current academic terms, including supply costs
- Expenses for extracurricular participation
- Gear and equipment for extracurricular activities
- Disposable income for petty expenses
- Savings for future asset purchases like cars or gear upgrades for extracurricular hobbies
- Savings for education
- Emergency savings
This covers the basic topics that might pop up in the average teen's budget until they reach an age where they may be thinking about moving out and then it's important to talk about calculating grocery and living expenses. Tailor your family conversation for specific goals and plans for the future.
Setting Up a Teen Budget Worksheet
The easiest way to track a budget continues to be through a worksheet, whether it's on paper or digital. Since most people have made the move to financial planning and management software or apps, it's helpful if you find one that is age appropriate. If your bank or credit union offers online banking with budget support like ProFed's Money Management tool, you might even be able to use the savings or checking account your teen already manages to set up the budget. Money Mangement is a free tool built into online banking that helps you prepare a budget, set savings goals, and see where you are spending your money plus you can add accounts and loans from other institutions. This makes putting real numbers into it easier than ever, especially for teens.
The easiest way to teach teens how to use a budget worksheet is to reference resources you use for your personal budget. If you use a written home ledger rather than a digital spreadsheet, teach that method first. If you use a digital app like ProFed’s Money Management tool or something similar, start with that process. Training on a technique that you are comfortable with allows you to answer questions while providing oversight. There may be issues from time to time and teens may need help navigating when unexpected expenses arise. Working through these events will only help teens learn the importance of a budget.
Checking and Debit Management
It's up to you to decide when your teens are old enough to embrace a debit card and checking account, but it's a good idea to help them learn about these banking features before they're on their own as adults. If you're wondering when to expand the budget conversation into a lesson on checking accounts, consider your teen's spending patterns.
- Do they frequently need access to credit or debit cards to make purchases?
- Are they often requesting gift cards for digital goods like games?
A checking account with a debit card can teach teens how to manage their own money. If they have mastered keeping track of their budget, this is the next step to making them responsible for their spending. It's important to be involved until your teen understands the timing of check and debit card transactions.
Remember, electronic payments are the most popular way to pay for goods offline as well as online, and they're likely to be the dominant method your teen uses as a young adult. Some debit card transactions do not immediately debit your teen's account and may take several days, so it is important for them to keep a ledger. Pre-paid credit cards may be another option to make purchases as these cards will not allow your teen to spend more than the amount on the credit card. These stepping stones can help you pave the way to responsible financial management. Using the tools above will help you to include your children in any financial lessons for their future.
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