Teaching Your Teen About Budgeting
Your teen is becoming more independent, but still needs plenty of advice from you. With more money to spend and more opportunities to spend it, your teen can easily get into financial trouble. So before money burns a hole in your child's pocket, teach him or her a few financial lessons. With your help, your teen will soon develop the self-confidence and skills he or she needs to successfully manage money in the real world.
Developing a written spending plan or budget can help your teen learn to be accountable for his or her finances. Your ultimate goal is to teach your teen how to achieve a balance between money coming in and money going out. To develop a spending plan, have your teen start by listing out all sources of regular income (e.g., an allowance or earnings from a part-time job). Next, have your teen brainstorm a list of regular expenses (don't include anything you normally pay for). Finally, subtract your teen's expenses from his or her income. If the result shows that your teen won't have enough income to meet his or her expenses, you'll need to help your teen come up with a plan for making up the shortfall.
Here are some ways you can help your teen learn about budgeting:
- Consider giving out a monthly, rather than weekly, allowance. Tell your teen that the money must last for the whole month, and encourage him or her to keep track of what's been spent.
- Encourage your teen to think spending decisions through rather than buying items right away. Show your teen how comparing prices or waiting for an item to go on sale can save him or her money.
- Suggest ways your teen can earn more money or cut back on expenses (e.g., rent a DVD to watch with friends rather than go to the movies) to resolve a budget shortfall.
- Show your teen how to modify a budget by categorizing expenses as needs (expenses that are unavoidable) and wants (expenses that could be cut if necessary).
- Resist the temptation to bail your teen out. If your teen can depend on you to come up with extra cash, he or she will never learn to manage money wisely. But don't be judgmental--your teen will inevitably make some spending mistakes along the way. Your child should know that he or she can always come to you for information, support, and advice.
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