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Helping Your Teen Learn to Budget His Money

written by: Debbie Roome • edited by: Tania Cowling • updated: 8/2/2012

It is important for your teenage children to learn how to handle money. Spending patterns set in the teen years will tend to influence them when they reach adulthood.

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    Where Does the Money Come From?

    Teenagers’ money management skills are generally learned from their parents. This can be a conscious or subconscious process. Before looking at how to guide teen spending, it is important to ascertain where their money comes from:

    • Parents often give teens an allowance that may increase as the child grows older. This money should be earned, not just handed out freely. Many families expect their teenage children to do chores around the home and garden, and if these are completed satisfactorily, they will pay the allowance. This may be done weekly, biweekly or monthly.
    • Many teens look for part-time work to boost their finances. This is an excellent way of earning money as they learn that it takes hard work and perseverance.
    • Teenagers often request monetary gifts for birthdays and Christmas. This can boost their finances and help them to buy a sought-after item that they could not normally afford.
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    Helping a Teen Open a Bank Account

    Most banks have realized the spending potential in their teen customers and offer a range of accounts that are free to operate. When children reach the stage at which they have money coming in, it's a good idea for them to open an account. They can track their spending and balance through online banking and the cards come in a range of funky designs. A Visa debit card can often be linked to a savings account and will enable the teen to purchase goods online, using money that's available as opposed to credit.

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    Setting an Example to Teen Spenders

    Your children have spent their lifetimes observing you and your spending habits. In most cases, they will follow in your footsteps. If you splurge and come short before each payday, they too will spend impulsively. If you have savings accounts and regularly put money away, they will be more likely to do the same. It is never too late to change your ways and set a good example for your teenagers.

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    What Expenses Should Teenagers Be Expected to Pay

    There is no set answer to this question and the response will also depend on the age of your teen and your family situation. Here are some thoughts to consider:

    • Discuss a teenager’s allowance with them. Some would like parents to increase this on the condition that they buy their own clothing and toiletries.
    • Entertainment is often a big expense with teens. They like to hang out with their friends and go out for milkshakes, burgers or a movie. It is acceptable for parents to subsidize these types of activities but to reduce the amount given over the years.
    • When a teenager gets their driving license, it is fair to expect them to put gas in the car if they use it frequently.
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    Should Teens Set a Budget in Place?

    Teenagers tend to live in the present and spend impulsively. This means they may run out of money for basics that you expect them to pay. Writing up a budget and sticking to it will reduce this type of problem. It is important that you don’t bail your teens out if they run out of money. In a crisis, you can extend a loan but should insist that this is repaid within a certain time frame. Parents can offer to help their teens work out a monthly budget by using the following tips:

    • Add up how much money the teen expects to bring in each month. Include allowances, earnings and expected gifts. These amounts may fluctuate and, in that case, the teen should draw up a new budget every month.
    • List the expenses expected for the month. This will vary according to what the teenager is responsible for, but may include gas, clothing, personal toiletries, entertainment, and repayment of loans to parents.
    • Encourage your teen to include savings and giving in their budget. This can be done as a percentage if their income varies from month to month. Some suggest saving 10% and giving 10% to charity. This may not appeal to your teen but it is an important part of the way life works.
    • If their budget does not balance and the teenager is spending more than is coming in, help them to decide where they can cut back or how they can earn more.
    • Allow a teen to look at the family budget and see how you handle the household finances. This will make them aware of the extras such as insurances and mortgages that they will need to deal with as an adult in the future. It may be a good idea to allow your teen to do a family grocery shop with minimal supervision. They will learn by experience the cost of eating well - and if the family has to eat junk for a week, it will be a lesson to the teen that healthy food is essential for well-being.
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    Teens will Make Mistakes

    Teenager's money management will not be perfect and they will undoubtedly face financial crises as they mature. You can help them through these difficult patches by guiding their decisions and encouraging them to budget carefully. If teens spend their money as it comes in with no thought of how much they will have left for necessities, they will inevitably end up in trouble. Parents need to set a good, consistent example and be firm with how much financial aid they give their teens. With support and guidance, your teenagers will mature and go into the future as responsible young adults who handle their finances wisely.