How To Help Your Teenager Learn To Budget

02
March

One of the most important lessons you can teach your teenager is how to handle money. It’s something that will greatly affect the quality of his life. Teach him to assess how much money is coming in; what basics must be covered; how much to save for unexpected expenses; how to plan for big-ticket items; how to handle credit; and how to be a smart consumer. Enable him to follow his own budget so he doesn’t make mistakes he’ll regret later.

Assess Incoming Money

The foundation of all budgeting is not to spend more than you have. Start by helping your child itemize regular income. Look at formal jobs, informal chore money, monetary gifts, money on investments and any other income. Tell him to add up only money that comes in on a regular basis and use that for his budget. Suggest he account for irregular money separately.

List Basic Expenses

Teach your child that necessities come first. When he’s living with you, these might include his share of car insurance, for example. When he leaves home, necessities would be things such as housing, food, utilities and transportation. If he’s a college student, tuition, fees and books would count.

Save For Unexpected Expenses

One of the hardest lessons in life is an unexpected expense. Explain this could be a car suddenly needing repairs, the rent being raised or a computer crashing. Point out that if the teen pays for basic needs but then uses up remaining funds on frivolous spending, he won’t be able to fix his car if it breaks down.

Save For Big-Ticket Items

Instead of using a credit card to pay for a spring break vacation or a new gaming system, your teen should save up for them. As he saves and time passes, he may decide he doesn’t want the item so much. Alternatively, he may still want it but will be able to buy it without getting into debt. A big-ticket item isn’t always a luxury; college tuition, for example, is one of the biggest expenses a young person can confront and he should save accordingly.

How to Handle Credit

Think twice before giving your teenager your credit card. Instead, give him a prepaid debit card. Load it with a set amount, such as his allowance, and challenge him to use it according to his budget. When he is able to get a card in his own name, it’s crucial to teach him to only use as much credit as he can pay off when the bill comes. If he is a student, he likely will have credit in the form of student loans. If so, advise him on how to set a budget once he completes his degree so he can make his loan payments on time.

How to be a smart consumer

Teach your child how to shop for groceries based on unit price. Make it a rule never to buy clothing at full price. Show how to research electronics and compare manufacturers and models for price and durability ratings. Explain how advertising often doesn’t give the complete or true picture of cost.

Once you’ve talked to your teen about these strategies, have him create his own budget and determine whether he needs to cut expenses to make his income cover necessities and unexpected expenses. He might also decide he needs to increase his income. Stand ready to redirect him as you did when he was learning to ride a bike. Soon he’ll be taking off on his own with your lessons helping him to find his own way.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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