Teen Series: (Part 3 of 15) Basic Budgeting

As teenagers prepare to embark on their journey to independence, understanding the fundamentals of budgeting is an essential life skill that will set them on the path to financial success. Learning how to manage money wisely, set financial goals, and make informed spending decisions are crucial steps toward financial independence. In this blog post, we’ll explore some basic budgeting knowledge that every teenager should know before leaving the nest. 

While I do teach my kids that money and wealth is not the end goal, it’s still stressed to them that being good stewards of what they have earned and what they have been blessed with is certainly wiser than spending willy nilly. 

Get ready to embrace the world of personal finance and pave the way for a secure financial future!

1.

Tracking Income and Expenses

The first step to successful budgeting is understanding where your money is coming from and where it’s going. Encourage your teenager to track their income, including allowances, part-time job earnings, or any other sources of income. Show them how to categorize and record their expenses, such as school supplies, entertainment, transportation, and savings. Utilize budgeting apps or spreadsheets to simplify the process and provide a visual representation of their financial situation.

Tracking income and expenses will help them gain a clear understanding of their spending patterns and make informed financial decisions. 

Knowing exactly where your hard-earned money goes might prevent them from spending that last $8 in their bank account and risk overdrafts, which can affect their credit standing in the future. It’s not a be all end all, but it’s best to teach them the important skill of money management early on to avoid those $35 fees. Ask me how I know.

2.

Set Financial goals

Teach your teen the importance of setting financial goals. Discuss short-term goals, such as saving for a concert ticket or a new gadget, and long-term goals, such as saving for college or a future car. Guide them in breaking down these goals into actionable steps, determining how much they need to save and for how long. Emphasize the value of prioritizing goals and making intentional spending choices aligned with those goals.

Setting financial goals gives purpose to their saving and spending habits and encourages responsible financial planning.

Saving without a goal is fine, but think like a teenager. It’s hard to save for the sake of saving, unless you grew up with a financial planner dad like my husband. Growing up, I was content with spending any penny I made. I wasn’t taught to think long term. I aim to change that with my kids, and help them to change the instant gratification mindset. Foolish choices as a young adult led me to having to rebuild my credit as an adult. Help prevent those unnecessary headaches with some simple goal-setting.

3.

Create a Budget

I know as an adult, we’re not huge fans of the B-word. But unless we’re rolling in the dough, it’s essential! (I could argue that if you’re making bank, you should be keeping even tighter books, but I digress.) 

Help your teenager create a budget based on their income, expenses, and financial goals. Show them how to allocate their income to cover necessities, savings, and discretionary spending. Discuss the importance of distinguishing between needs and wants, encouraging them to prioritize essential expenses while still allowing room for fun and leisure activities. Teach them to review and adjust their budget regularly as their income or expenses change. Have fun – but be smart. If their finances are tight this month because of unexpected car trouble, teach them they don’t need to attend that concert or go out to dinner again.

While I enjoy some leisurely spending without consequence like the next gal, budgeting and sticking to it helps you to paint a roadmap for financial success. It allows them to take control of their money and make it work for them.

4.

Make Smart Spending Choices

Guide your teen in making smart spending choices. Teach them the value of comparison shopping, seeking out deals, and avoiding impulsive purchases. (I know – boo. That’s no fun. But if your money is ear-marked, don’t spend it!) 

Encourage them to research prices, read reviews, and consider quality and durability before making a purchase. Can you buy that thing used instead of new? Discuss the concept of delayed gratification and how it can help them save money in the long run. By fostering smart spending habits, they’ll develop a discerning eye for value and make thoughtful decisions that align with their budget and financial goals.

I honestly think once they begin the process of earning their own money, the concept of wise spending should come pretty naturally. If not, do some quick math with them. How many hours did you have to work to buy that new pair of shoes? Was your time worth it?

5.

Saving and Investing

Introduce your teen to the power of saving and investing. Teach them the habit of saving a portion of their income regularly, whether it’s for emergencies, future goals, or long-term financial security. 

Discuss the basics of saving accounts, compound interest, and the benefits of starting early. Introduce them to the concept of investing and the potential for long-term growth

Emphasize the importance of understanding risk, diversification, and seeking professional advice when considering investment options. By embracing saving and investing, they’ll lay the foundation for financial stability and wealth-building in the future.

Equipping your teenager with basic budgeting knowledge empowers them to take control of their finances and set the stage for a secure financial future. By tracking income and expenses, setting financial goals, creating a budget, making smart spending choices, and embracing saving and investing, they’ll develop strong financial habits that will serve them throughout their lives. 

So, gather your teenager, open up the world of personal finance, and watch them blossom into financially savvy individuals ready to navigate the exciting and rewarding world of money management!

Related Posts:

woo hoo!

10% off

Join our newsletter for an exclusive 10% off your first order straight to your inbox!