While budgeting is hard for many parents, it might actually be easier for teens. There are fewer spending categories to monitor and smaller sums of money to account for from a summer job, allowances and other sources.
The way to start the process is to record expenses. Keep a journal for one or two months of everything you buy, down to the penny. That means tracking not only gas in the tank but also the iced coffees and vending machine chips. Everything.
At the same time, record in a separate column the amount of money you’re bringing in from a paycheck (after taxes and other payroll deductions, of course), an allowance, birthday gift money and such.
Once you have numbers to work with, sort the information into at least four main categories:
- Savings – make sure the teen is saving at least 10% of after-tax income. You need to start this habit as early in life as possible.
- Required expenses – car insurance or gas could fall into required expenses and some will include church donations.
- Discretionary expenses
- Future expenses but don’t allow this to the “savings” category. It is for a big purchase that is over 6 months away (such as college).
Keep the following points in mind as you guide them.
- Decide what’s important. Do you really need the polo shirt, the fitted baseball cap or the video game? Or are those wants?
- Set goals. Kids need something concrete to work toward. Whether it’s a car, college or soccer shoes, teens will be more motivated to watch their dollars if there’s a reward at the end of the process. Remind your kids that saving for a rainy day is alive and well.
- Be flexible. Allowing some discretionary spending — even an occasional $5 latte — can do wonders for a teen’s frame of mind. Just account for the luxury in the budget so it doesn’t become a “budget leak,” she said.
- Be creative. Especially for teens living at home, never overlook the barter system. For example, trade lawn work or preparing a family dinner for gas money.
You may also need to have the painful talk that the teenager should do as you say but not as you do if your own budgeting skills are not well developed.
Source: Budgeting can help teens control their spending impulses | The Kansas City Star