Many teens think they know almost everything – that is until they have to experience adulthood for themselves. Parents of adult children will likely tell you that when their children were teens they, as parents, “knew nothing,” but when the magic of adulthood came around, everything changed.
Your teens may even think they know how to budget. As a parent, however, you know that it’s not always easy to make and stick to a budget.
So how do you teach teens about budgeting? At Wealthy Habits, our goal is to make the conversation easier and a lot more fun for both parents and teens. Here are three tips we share in our online parent webinar, How to Teach Your Kids About Budgeting.
Start by having an open and honest conversation. Like everyone else, you aren’t perfect and have likely made financial mistakes along the way to adulthood. If you want your teens to listen, start by being honest with yourself and with them. Even if you are in a good position now, admitting past mistakes lets your teens know that it’s OK to make mistakes as long as they then focus on making better choices. Next, make time to involve your teens in the financial decisions of the family. Don’t worry, you still have veto power, but make sure you actually listen to what your teens have to say or it won’t make a difference. Share the household gross income as well as all of the expenses (taxes, insurance, retirement contributions) that are deducted before you even receive it. Ask your teens their opinions on the household weekly budget. You may be surprised what you hear. For example, you may find out that they’re willing to eat out less if it means being able to save more for something that’s important to the family. Getting kids involved with family budget decisions is a great way to inspire them to think about money from the perspective of a decision maker.
Don’t bail your teens out if they make a bad decision. We all make money mistakes, but our success comes from learning from those mistakes. Many children, preteens and teens make money mistakes like opting to spend all of their allowance on a new PS5, only to realize that they don’t enjoy it as much as they thought they would. And when it’s time to purchase something they really need, they are hit with the reality they don’t have the money to buy it. By all means, sympathize with your teens and help by giving them ideas on how to remedy the situation. However, if you bail them out by buying what they need, they are missing an opportunity to learn an important money – and life – lesson. In real life, when we run out of money, there’s a consequence – we have to wait until our next paycheck, pick up a side job or experience the bigger consequence. For teens, there may be opportunities to earn extra money by doing more babysitting or walking dogs in the neighborhood. You could also offer them a low-interest loan, if you’re willing. It’s better for kids to experience the consequences of failing to budget in in their teens instead of their 20s.
Open a checking account and a savings account for your child. Children can typically get a debit card at age 13 in their own name when they open a joint account with a parent or guardian.
Teen or student accounts are typically available through age 18, with no monthly service fee. Such accounts give children an opportunity to have something in their name, and with that comes responsibility. Having a debit card can help them begin to understand how to manage money, and you’ll be able to monitor the card’s use.
If you decide this is a good option for your teens, take them to the bank and instead of doing all the talking, encourage them to ask lots of questions. They need to hear from the banker what will happen if they overdraw the account, lose their debit card or fail to examine account statements for fraudulent charges.
Sure, your teens may make some bad decisions, but at least there is relatively low risk that they’ll get themselves in too much trouble, especially with your oversight. If they do make a mistake, refer back to Tip No. 2.
These are just some of the concepts we cover in our How to Teach Kids About Budgeting Webinar. We’d love to have you join us for an upcoming session – in celebration of Financial Literacy Month, you can take the webinar on April 7, 2021 for FREE. Save your spot now!