As your children grow, the decisions they make regarding money become more important, and teaching the young adults in your life about budgeting is no walk in the park. Don’t believe us? Just try to explain the importance of a checking and saving account without seeing eyes start to roll! But what if there was a simpler way? Keep reading to learn some practical budgeting tips to share with your teen, as well as some tech solutions.
5 Steps to Teaching Budgeting
Showing your teen just how important checking accounts, savings accounts and credit cards are to their overall finances is no easy task. However, you definitely don’t want them to be surprised when the bills start rolling in! While most schools include some sort of banking basics in their curriculum, few go into all of the aspects of budgeting, savings, lending and other common areas of finance.
In order to ensure your teen understands all these areas, walk through these five steps, using your own budget as an example. Then, translate it to your teen’s budget.
- Develop a list of recurring monthly expenses. Give your teen an opportunity to list off the items that they think are part of the household’s expenses and then fill in the gaps. Take this opportunity to explain the difference between “wants” and “needs” in those recurring expenses. Then, look at the recurring monthly expenses for your teen and have them categorize those as wants or needs.
- List total incoming money. Does your teen have a part-time job or an allowance? Use this number for their income.
- Subtract expenses from the total income to see if the budget makes sense.
- If the expenses outweigh the income, figure out how to cut unnecessary expenses. This is where the categorization of wants and needs can be helpful.
- Develop a savings strategy if there is leftover money. If your teen doesn’t have a savings account, go to the bank to see what your options are. Many banks will have age-specific accounts without a minimum to help encourage teens to get saving!
Budgeting Apps for Teens
Since your teen is likely always on their smartphone, have them download one (or all) of these apps to help them handle their daily budgeting on the go.
This free app (and website) provides all-around financial and budgeting services. When your teen sets up their account, they have the opportunity to schedule a call with a LearnVest planner to discuss budgeting goals and tips. They offer a seven-step program to help your young adult organize, focus, plan, protect, build, maximize and achieve!
There are also paid memberships at LearnVest that your teen can upgrade to once they are working at their first full-time job and ready to invest. LearnVest is great if you (or your young adult) wants a tool that they can grow with.
Mint allows you to see all of your finances at a glance, including your balances and transactions. It pulls all of the information into one place so your teen can see how they’re spending their money daily, weekly and monthly as a whole, as well as broken out by category. It also updates automatically, so they can crunch numbers in real time. The best part of the app for your teen? It analyzes their spending and saving to offer useful budgeting tips!
If the above apps are a bit too complicated for your teen, SimpleTrack is definitely the way to go. This budgeting app is as easy as it gets — it tracks how much money is left in each of your budgets. You can categorize your expenses in the app, marking spending with labels like “Dining Out” and “Fun Money.” Every purchase can also be geotagged so your teen can remember exactly where their money goes!