7 Ways to Teach Teens How to Budget

Have you ever heard your child say something like "I just don't know where all the money goes"? Older children and teenagers in particular, need to understand how money works, including where it comes from and where it all seems to go. Habits, disciplines and routines that your child learns now will be of even greater value when they leave home for college or a home of their own. Here are 7 ways to teach teens to budget.

Explain to your teen how cheques and credit cards work, and how banks operate.
Be sure to mention interest payments and service charges.

It's not necessary to go into business degree detail, just give them an appreciation or a curiosity and the ability to use the system.
Give your teen a weekly or monthly allowance, unless she has a job and considers herself financially independent.
It's much easier to teach budgeting in the context of their own money. Discuss and agree on what you will pay for and what the teen will pay for.
Consider car insurance, gas, school clothing, fees for extracurricular activities, the phone bill, and so forth. Even if it becomes uncomfortable, the discussion will help you both understand the ground rules. Give your teen financial responsibilities that you have both agreed on.
This could include paying their own phone bill or car insurance. Teach your teenager how to make a budget.
Compile a list together of the teen's monthly expenses and the dates they must be paid.

Sit down with the teen and illustrate how his income or allowance must be managed to meet the expenses. Encourage your teen open a bank account. Most teenagers are impulsive, so not having cash in hand may keep the spending down.

Think longer term and set goals.

Talk about saving for college, cars, computers, mountain bikes or other big purchases. Make clear what you plan to pay for and what you expect of the teen. An important part of teaching a teenager to be financially responsible involves you as a parent not caving in.
If for example, your teen blew all of her money on a new outfit at the beginning of the month and now doesn't have enough left to go to the movies with friends, be sympathetic but don't bail her out.
If you have to get your teen out of a financial bind, make arrangements for her to pay you back over a designated period of time.

Be consistent in your approach.

New disciplines like new shoes can be a bit uncomfortable at first, but don't give up and in a short time the new habits will become automatic and save a lot of arguments.

Try and develop a cooperative and agreed approach to financial education.
If your child can understand and accept what you are showing they are less likely to rebel against it once they become more independent. By teaching your teen to budget, you are not trying to bend them to your will, but rather to set them up for a lifetime of financial responsibility and prosperity.