Teaching your kids and teens how to budget is a crucial skill they’ll carry into adulthood. The sooner they learn about money management, the better prepared they’ll be for their financial future. Schools may teach about cells and verbs, but financial literacy is often overlooked, which leaves many teens unprepared when it comes to managing their money.
It’s never too early—or too late—to start budgeting. Whether it’s showing a preschooler how to save their allowance or teaching a teen how to prioritize their spending, the fundamentals remain the same.
Why is Budgeting Important for Teens?
Teens are constantly surrounded by temptations to spend, from a new pair of shoes to a coffee with friends. Without a budget, it’s easy for them to blow their money on things they don’t need, leaving them short when it’s time to pay for important expenses like their phone bill or save for future goals.
Creating a budget helps teens plan for how they want to spend and save their money. When teens learn how to budget, they develop valuable money-management skills that will benefit them throughout their lives. A good budget ensures that there’s always money available for what they truly need, while still leaving room for the things they want.
5 Steps to Create a Budget for Kids
- Calculate Their “Income”
Before kids can create a budget, they need a consistent income. Whether it’s an allowance, money from chores, or a small job, giving kids money to manage is essential. The goal is for them to understand how to plan based on a fixed income. Tools like an allowance calculator can help parents determine the right amount for their family. - Identify Fixed and Variable Costs
Just like adults, kids and teens have fixed costs (like subscriptions, extracurricular activities, or a phone bill) and variable costs (like eating out or buying new clothes). Teaching kids how to recognize these costs and prioritize their spending is a valuable lesson. This practice will help them avoid the trap of spending too much on unnecessary items. - Distinguish Between Needs and Wants
One of the most important lessons for kids is understanding the difference between needs and wants. Needs are essential for daily life, while wants are things we desire but can live without. Helping kids understand this difference—and to budget accordingly—prepares them for managing their money in adulthood. - Set Up Savings Goals (Using the 50/30/20 Rule)
Encourage kids to set savings goals. Whether they’re saving for a new game console or something bigger like a car or college tuition, teaching them how to save is a key part of budgeting. The 50/30/20 rule is a simple model for budgeting: 50% for needs, 30% for wants, and 20% for savings. This rule ensures they save for the future while still enjoying life today. - Decide on Budget Categories
Once they have their income and expenses sorted, kids can break their money into categories like savings, entertainment, or clothing. A simple yet effective method for saving is to set aside 20% of their income for savings first, then allocate the rest to other categories. Tools like savings jars or online accounts can help kids track their savings and expenses.
Tools to Help Track a Budget
To make budgeting more engaging for kids, use some of these fun and effective tools:
- Budget Planners: A physical budget planner with fun designs can motivate kids to track their spending. Using colorful pens or stickers makes it an enjoyable task.
- Budgeting Apps: Apps like Mydoh are designed to help kids and teens manage their money. They can track their spending, set goals, and even get a Smart Cash Card to make transactions.
- Budgeting Worksheets: Printable budget worksheets provide an easy way for kids to manage their finances on paper or digitally.
Making Budgeting Fun
Saving can be motivating when kids have a visual reminder of their goals. Consider using a savings chart or jar where they can watch their money grow. You can even make it a family challenge, with everyone working toward a common savings goal or competing to see who can save the most.
Conclusion
Teaching kids and teens how to budget is a powerful way to set them up for financial success. By giving them the tools, strategies, and encouragement to manage their money wisely, you’ll help them grow into adults who are financially independent and responsible. Start budgeting today, and watch your child develop essential skills that will benefit them for a lifetime.
