How to Cultivate Money Budgeting Habits in Teenagers

y from your physical presence and guidance. Before they leave your nest, make sure you’ve taught them everything they need to know so they can survive in this world. One of those vital life skills is budgeting. Here are four tips on how you can effectively teach your teens to create—and stick—to a budget:

Tip #1: Introduce Budgeting Basics

If this is the first time you’ll sit down with your teenage child to discuss money, it’s best to start with the basics. Orient them about different types of expenses and incomes. They should understand the most basic form of budgeting—tallying one’s income against the monthly bills. The best advice you could give them at this point is to live within their means. 

It’s also the perfect time for them to open a bank account. If they’re under 18 years old, you should be listed as their guardian, so you could track if they’re overspending. They may not need it right now, but balancing a chequebook is also a valuable lesson. Additionally, give them a run-down of necessary taxes and interests. Once you observe that your teenagers are responsible for their allowances, consider opening a low-limit credit card for them. It will empower them to start building good credit.

Tip #2: Create a Budget Pie

Tell your teenager that over a few months, you’ll be helping them to stick to a budget. Begin by having them create a list of their income, whether it’s from their allowance or a part-time job. Next, go through their expenses and help them categorize their spending. Allot a certain percentage for clothing, dining out, gas money, school materials, and so on. 

An excellent example of percentage allocations is the following:

• Savings 20% — Teach your children about the importance of having an emergency fund. They can use this money for a vacation, an investment, or a luxury item they’ve been eyeing for a long time. 
• Giving 10% — Encourage your teens to be generous by having them choose from a list of charitable institutions. Whether it’s for your church, community library, or an animal welfare group—generosity feeds the soul and helps your kids become well-rounded individuals.  
• Spending 70% — These should be spent on necessities, such as phone bills, toiletries, food, books, clothes, transportation, and so on.

Tip #3: Track Their Spending

For the next couple of months of “training,” have your teenager list down all their expenses. They should report to you at the end of every month whether or not they were able to stick to the budget both of you created. These days, there are great mobile apps that they can download to help them stay on top of their finances. 

Tip #4: Set a Great Example

As with any behaviour, kids tend to take their budgeting cues from their parents. As such, being a good role model is the best lesson you can give your teenagers. One way to do this is by involving them during family money meetings. Allow them to take a peek at how you and your spouse handle your finances. When you raise them in a financially secure home, they’ll adopt your healthy habits for when they’re on their own.

Research shows that people who have good financial habits while they’re young are most likely to grow up to be financially responsible adults. Teaching your teens how to monitor their expenses and save for their future is a powerful way to set them up for success.