How to Budget for Teenagers: 7 Tips from Financial Experts
June 15, 2021
Financial responsibilities don’t need to be boring or a burden. It’s important to remember that money is easy to spend but is important to earn. If you’re hoping to learn more about how to budget for teenagers, keep reading this guide.
This article contains guidance from several financial experts on how to budget for teenagers. Financial literacy in young adults is very important, especially for them to have a successful future.
Find a Budget for Teenagers that Works
When it comes to budgeting, there are a lot of options available to teens. Some obvious budgeting choices include budgeting apps and spreadsheets to track their expenses.
But if you would rather have an all-in-one account to teach your teen how to save, spend, and earn money wisely, think about opening a prepaid card.
There are several different prepaid card options for you to choose from, so you just need to find the one that looks the best and works the best for you and your teen.
Educate Them About the Major Financial Decisions They’ll Face
It’s important to educate your teen about the three major financial decisions that they’ll face in their life: college tuition, purchasing a new car, and credit card usage.
All three of these financial decisions have major companies and institutions that insistently target you and your teenager to spend money using their company.
Take more time thinking about what college your teen should go to (and the ROI for how much you’ll need to take out in loans), understand how a credit card works and the temptation that comes with credit cards, and teach them never to buy a new car.
Remember that the personal finance decisions that are made from age 17 to 19 will make an impact on your entire 20s.
Where Do Teens Spend the Most Money?
By far, food and clothing. Food is an expense that’s sneaky because it’s usually done in increments that don’t catch our attention quickly. But as we know, those $8 to $10 meals can quickly add up if you’re spending that consistently.
Teens will often eat out twice a day, go out for expensive coffees, and more. Because most teens don’t think about budgeting, the actual cost of their monthly choices isn’t tracked, so they’re never aware of the overall total, which can make for poor money management.
Learn About Compound Interest
Teens must know how compound interest works. This is because it’s a part of every big financial decision they’ll make throughout their lives.
When they learn about retirement, investing, and saving, teens have to learn that compound interest is powerful and can work for them – especially if they begin saving early on.
But they also need to know that compound interest can work against them when it comes to debt, such as credit cards.
Learning about compound interest is a good way to understand how financial decisions can have a long-lasting impact on your teen and how they want compound interest working for them, not against them.
When Should Teens Learn to Balance a Checkbook?
A great time to introduce budgeting and expense tracking to your teen is junior high. At this age, your teen is mature enough to be able to understand the concepts before they start earning more independence (i.e., driving).
Teens don’t have to learn how to balance a traditional checkbook. Instead, they should learn how to track expenses, understand how to check their bank balances, and understand that money is finite.
Learn Your Money Values and Personality
Teens need to have a sense of purpose, and money is one way for them to reach that purpose. But if they don’t have a clear direction, their money behaviors can lead them away from what makes them happy.
Advertising and social media do an excellent job telling us what we think we need and what we should be spending our time, attention, and money on, but their best interests aren’t our best interests. Instead, they’re the opposite.
When figuring out your money values, answer the following questions:
Why do you want to have money, to begin with?
What will having more money allows you to do?
Do you judge yourself based on what brands you buy?
Do you judge others based on what brands they buy?
How do you want to spend your time?
How can money bring you happiness?
Look Over Your Previous Financial Statements
Look at how much money you made in the last month and where all that money went. Ask yourself if you followed through with your goals. If you didn’t, what can you do better this month to stick to your goals?
Save At Least 10 Percent of Your Money
Whether your teenager makes money through an allowance, birthdays, or has a job, they should begin saving at least 10 percent of their money. If they make $20 per week from an allowance, they should be saving at least $2 every week.
To show you how much of an impact this can have: if they save $2 per week, your teen will have saved $8 by the end of the month. In one year, they will have saved $104.
Show Them That Budgeting Is Fun
Budgeting often gets a bad rap. This is because people often think that they’re restrictive and boring, but they’re not that. Budgets can make you feel empowered.
Budgets allow your teen to take control over their financial security and help them build the life that they dream of. The quicker they learn this, the better.
A great way to get your teen into budgeting is to make it fun. Think about making financial quizzes or games with prizes to show them that financial knowledge of valuable.