Teaching teens how to budget effectively can help them build positive financial habits and skills that last a lifetime. Teens can earn money in many ways, and some of today's teens are even earning income from online businesses! Once the money starts rolling in, learning how to budget is crucial.
Earnings, Expenses, Savings
It is important to learn how to budget based on earnings, expenses, and savings for future goals. You can help your teen build a budget with a few simple categories that focus on the most important items. Examples:
- Income (part-time job, allowance, etc.)
- General Savings (Rainy Day Fund)
- Short-term Purchases (Laptop)
- Long-term Purchases (Car or Post-Secondary Education)
- Cell Phone
- Transportation costs (fuel, insurance, car payments, bus passes, etc.)
- Subscriptions (Spotify, Netflix, etc.)
- Dining Out
- Other Entertainment
- Other entertainment
Figure Out a Strategy
Once the budget has been set with categories relevant to your teen, they can determine how much of their earnings to devote to each category. This might take a few tries as they figure out how much of their money they really want to dedicate to things like entertainment and subscriptions, and which goals they want to prioritize.
The 50/30/20 rule can be a good place to start:
50% of income for needs
30% for wants
20% for savings
Creating good budgeting habits early on can make it much easier to prioritize spending later in life. The most critical point to emphasize is that a budget should be built to support your goals, no matter what your goals are.
Need a little more help to get started?