Personal finances and budgeting may not be at the top of your teenager’s list of favorite things, but this is an important time for them. Developing healthy financial habits now can help set them up for a lifetime of good decision-making and financial success. Whether you have a teen going off to college in a year or one that’s still learning the basic lessons about budgeting and money, here are some simple tips about how you can teach your teen about personal finances and budgeting.
Set a reasonable allowance
Setting a reasonable allowance is the first step to teaching your teen personal finances.
Allowances should be based on age and responsibility, as well as the family’s financial situation. This will allow you to give them enough money to cover expenses without giving them more than they need. You should also consider whether or not your child has any financial goals (e.g., saving for their own car) when determining what amount of money they receive on a regular basis.
Challenge your teen by tying allowance to chores
To teach your teen about personal finances and budgeting, you should tie allowance to chores. The most important lessons are learning the value of money, being responsible with it, being independent and self-sufficient, and understanding that you have choices about how you spend your time and energy.
In addition to helping out around the house (this includes doing the dishes or washing clothes), teach your child that their allowance should be earned by doing additional tasks such as taking out trash or walking the dog. If they don’t complete these tasks on time or at all — especially when they’re older—they don’t get any allowance at all! This teaches them how money and finances work in real life: You earn what you want either by working hard or by making wise decisions regarding how much effort it takes to make money. The more responsibility they take on when they’re younger will lead them into better habits later in life (and keep them from falling into debt).
Teach budgeting by creating a monthly budget
Budgeting is a way of life. It’s not something that you do just for a few months and then stop. Budgeting is a habit, and it’s something that you need to keep doing throughout your life.
It’s important to start teaching your teenager about the basics of budgeting right away so they can start developing their own spending plan as soon as they’re old enough to handle money on their own. Here are some tips on how to introduce them to budgeting:
- Create a monthly budget together. If your budget isn’t a complicated system, you can start by showing them your budget and explaining to them how it is set up.
- Help them understand the difference between fixed and variable expenses. Have them list all of their expenses and properly categorize them.
- Explain the difference between gross and net income. If some of their income is from a job, they may have already noticed this in their paycheck.
- Show them how to track expected versus actual expenses. Make sure they know how to tell if they are keeping within their budget so that they can self-correct in the future.
Help your teen understand different money habits and priorities
There are a few different ways to approach this. The first is to talk about the difference between needs and wants. A need is something that you must have, such as food or shelter, whereas a want is something you’d like but can easily do without, such as buying a new pair of shoes or going out for dinner with friends. It’s important to teach your teen that needs are more important than wants; however, it’s also crucial that they understand what their priorities and goals are in life before they begin making financial decisions on their own.
Another way of teaching this concept is by balancing short-term desires with long-term goals: some people dream of owning expensive cars while others want to travel all over the world—these may both be valid goals! But it’s important that teens recognize which ones they’re willing to sacrifice if need be (i.e., if they don’t have enough money).
Make your own financial slip-ups the learning lesson opportunity they really are
The best way to help your teen learn how to manage their money is to show them that you’re willing to do the same. If you don’t want your child wasting their hard-earned cash on a new video game or a pair of designer jeans, it’s important that they see you spending wisely as well. Do not be afraid of making mistakes when it comes to your finances—that’s what makes us human beings! You can admit that there are times when we’ve made poor decisions with our own money, but also explain how we learned from those mistakes and have since been able to turn things around for ourselves.
Explain this concept by sharing some stories about how your own experiences have taught you something valuable about yourself or the world around you: “When I was younger, I once bought one too many pairs of shoes because I thought I could sell them later.” Or maybe: “I made one big purchase (like a used car) at an auction without checking if it was in good condition first—and then realized later on that I’d gotten myself into trouble because there were problems with this used car.” This kind of honesty will show your teenager that there aren’t any right answers when it comes down to personal finance; instead of telling someone else what they should do (or shouldn’t), simply share some stories about what worked out well for others while also highlighting potential pitfalls along the way.
Share your own financial history
First and foremost, you have to be honest with your teenager. Do not sugarcoat your financial history or refrain from sharing mistakes you made in the past. This is an opportunity for them to learn from your experiences and avoid repeating the same mistakes themselves.
When it comes to your own financial successes and failures, there is no need to exaggerate or embellish—simply explain how things went well or poorly, as this will help guide them when making their own money decisions in the future.
The point here is that by being honest about your own personal finances now (or at least as far back as possible), you are setting a good example for how they should handle their own finances later on down the road.
Show your teen how to keep track of spending and pay bills
You can use many different methods to keep track of spending and paying bills. The method you choose should depend on your teen’s personality and preference. Some options include:
- using a budgeting app
- using a spreadsheet
- using a notebook
- pen and paper (I know, crazy)
If you want to give your child some control over how they learn about personal finances, consider having them help create the budgeting system (or app). This will reinforce that finances are both relevant to their lives and something they have control over.
Giving teens a chance to learn about money can also teach them lessons about independence and responsibility that will last a lifetime
Giving teens a chance to learn about money can also teach them lessons about independence and responsibility that will last a lifetime. This is especially true if you’re teaching your teen how to budget and manage their finances early on in life. Teaching them how to save or invest for the future can give them an added sense of security and confidence when it comes time for them to make big decisions—like buying their first car or house, going off to college, or even starting their own business.
A good way for parents and kids alike to start learning about personal finance is through simple conversations about what life was like when we were younger—and how much things have changed over time (or not). Remembering past experiences with our own parents—and maybe even grandparents—can help us see things from our child’s point-of-view while also helping us remember what makes us unique as individuals!
Future success
Teaching teens about money is a way to be involved in their life and make sure they are prepared for the world. So, start with teaching those beginning lessons of saving and spending wisely, but don’t stop there. Encourage them to think critically about their future goals and how they can use their resources to achieve them. The earlier you start talking about finances with your teen, the easier it will be as they grow older!