I’ve shared a lot of great tips to help your kids learn spending vs. saving and even about credit and debit. There is of course, more that they need to know.
The principles are the same as with creating any budget at all. The difference is in the amount of money the make and the types of expenses they will have. These differ as your child grows.
When your teenager is first creating a budget, that may be a term that is difficult for them to really fully understand. You might call it a Spending Plan instead. By calling it something other than a budget, it can make it take a positive stand. Now, your teen knows how they get to spend their money instead of a piece of paper telling them what to do. Spending Plan is much more positive than budget.
WHY THEY NEED A BUDGET
There are lot of principles your teen needs to learn when it comes to finances. Their budget, or spending plan, helps set them up for success.
- The budget is their roadmap to financial health. Just like they see a doctor and dentist to make sure that they are physically healthy, their budget does the same for their finances.
- Help them plan for the unexpected. What will they do if their car breaks down? They need to learn how to be prepared for the curve balls life will certainly throw their way.
- How to spend wisely. When spending is documented, it gives teens a better view of where they spend money. They can easily identify the areas where they are spending too much money. A budget allows them to see if they are spending more than they are making and then make adjustments according.y.
- Plan ahead. There are expenses which come up only once or twice a year. For example, college books are purchased only a couple of times a year. Paying for these needs to be budgeted all year long. This way, when it is time to buy them, the money is set aside.
- Develop a healthy relationship with money. If you look your own views of money, there may be things you do not want your children to do. You might be obsessed with it or fear it. Whatever your views, you want to make sure your teen has a healthy relationship with his or her money.
HOW TO GET STARTED
Making a budget or spending plan is relatively straight forward. Their budget will be a projection of the income they will receive and the expenses they will have. They will be able to use this budget to plan ahead and know which expenses they need to cover each and every month.
To being, you can use a paper and pencil. You can also download our free Teen Budget Worksheet if you would like. You might even want to use a spreadsheet. Any way will work, as long as it is something your teen feel comfortable using.
Have him or her look back at the past 2 – 3 months of income. This will help them determine how much income to include on the budget. The amount to put on the form will be the monthly average.
For example, if payday happens every 2 weeks, total up 6 – 7 paychecks and divide it by 3. That will provide you with the average income every month. This will be recorded on the budget as income.
Make sure all sources of income are included in this total. Some to consider include:
- Allowance
- Wages
- Gifts
- Interest/Dividends
- Tips
- Bonus
Next, have your teen look over the past 3 months of spending. Add up all of the various amounts paid and divide by 3. This will be the average amount for each expense.
CATEGORIES FOR THE BUDGET
A teen’s budget will look much differently than one for an adult. The categories will be different than those you have on your own, as expenses change as you take on more responsibilities. If you are using our free teen budget worksheet, then you will see many categories are already included for you.
If you wish to make your own budget, you can do so, make sure that