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By Dustin Goss
Dustin Goss writes about Personal Finance for Children, Entrepreneurs, and Business mindset.
We love our teens, and we want to help them create basic budgeting skills that will help them create long term success when handling their own finances. Below, we have some great budgeting tips and exercises to help you, help your teen.
Determining income
First things first, let’s talk about numbers. The first step in helping your teen understand their financial situation is to assess how much they make. Whether your teen has a regular job, works around the house, helps neighbors for extra cash, or does yard work helping them understand what they bring home will help them understand what they can afford to spend – or not to spend.
What expenses do they have?
If your child is working and a middle aged high school student; they likely will have expenses such as gas, car insurance, and phone bills. Those are costs that now that your teen is working will likely be picking up as their first step into financial independence.
Let’s do some math
Help them start by breaking down those expenses and create a budget for the extra fun stuff. Gather the total of these expenses over the course of a month’s time to get the most accurate baseline of expenses. Now that you have gone over the basics of your youths finances with them, it’s time to talk about the extra money and where it can go. Break down what is left after all the major expenses are taken care of, then see what your youth would like to do with what is left over.
Save Now Vs. Buy Now
We recommend saving now vs buying now. What that means is instilling in your youth the importance of wanting something and waiting, maintaining the ability to save. Versus spending the money now on what they want, and missing out in the future on something they may really need. Take this time as an opportunity to teach your youth this valuable life lesson.
In between ‘I got it’ and ‘I still need some help.’
If your youth is at the start of their independence they may still need some help from you. Big purchases such as their first car may be out of their budget. Take this time to create a savings plan with your youth – and a game plan on how to achieve their goals.
Balancing Acts
Take this opportunity to teach your teen that spending what they have should never exceed their income, otherwise known as; creating debt. Explain what being in debt means and teach them how to live within their means. If your teen finds that they need or want extra cash for activities or purchases, talk with them about ways to make money outside of what they currently are doing. Dog walking, babysitting, and helping out around the neighborhood are all ways that your teen can earn some extra cash.
Conclusion
Teaching your tween or teen about financial literacy is vital for their well being in the future. Mapping out a plan from the start will instill in them the importance of finances and keeping a good relationship with their bank accounts or piggy banks. Be sure to keep an eye on our site for more financial lessons and information to help you and the youth in your life map out their finances.
